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By II. if'oif 


Bv Max Lerner I 

Like all great books, The Wealth of Nations is the.outpouring‘not 
• only of a great mind, but of a whole epoch. The man who wrote it 
had learning, wisdom, a talent for worHs; but equally important 
was the fact that he stood "with these gifts at 'the dawn' of a new 
science and the opening of a new era in Europe. What ht wrpte was 
the expression of forces which were working, at the very time he 
wrote it, to fashion that strange anif terrible new species-=-Aoj«n 
ceconotnicus, or the economic man of the modern jrorld. I use that 
term not in the sense of the lifeless abstraction which economic 
theorists have invented to slay any proposals for social change, 
and which has in turn slain them. I use it rather for the very living 
and human businessmanj in defense of whom the economists have 
written and in whose interests they have invented their lifeless ab- 
straction. All the forces which were at work in Europe creating the 
business man, and the society he was to dominate, were at work 
also creating the framework of ideas and institutions within ^vhich 
Adam Smith wrote his book. And that book, as though conscious 
that one good turn deserved another, became in its own way a 
powerful influence to further the work of those forces. Thus it is in 
history. A new society, emerging from the shell of the old, creates 
Wramework within which a great thinker or artiSt is enabled to do 
his work; and that work, in turn, serves to smash finally the shell 
of the old society, and to complete and make firmer the outlines of 
. the new. Thus it has been with Machiavelli’s Prince, with Adam 
Smith’s The Wealth of Nations, with Karl Marx’s Capital. 

That is why the arguments of all the scholars who have been 
thrashing about, seeking to determine how original Adam Smith 
was, are essentially futile. No first-rate mind whose ideas sum up 
an age and influence masses and movements to come is\in any 
purist sense original. The Wealth of Nations is undoubtedly the 
foundation-work of modern economic thought. Yet you can pick it 
to pieces, and find that there is nothing in it that might not have 
been found somewhere in the literature before, and nothing that 
tCnies out of it that has not to a great degree been punqfured by 
the literature that followed. What counts is, of course, not whether 
particular doctrines were once shiny new, or have since stood the 
ravages gi time. What cdVints is the work as a whole — ^its scope, 
conception and execution, the spirit that animates it and pl&q( 
it hasiihad is history. 

Vi introduction 

Here, then, is the thing itself: a strange mixture of 5 book — eco- 
nomics, philosophy, history, political theory, practical progranr; a 
book written by a man of vast le arning and subtle insights; — a man 
with a mind that^was a powerful analytic machine for sifting out 
the ‘stuff in his notebooks, and a‘ powerful synthetic machine for 
putting it together again in new and arresting combinations. Smith 
was sensitive to the various elements on the intellectual horizon of 
his day. Like Marx‘ after him, he was no closet scholar, shut off 
from the world; he was all antennae, reaching out for and absorb- 
ing everything within reach. He wrote at the end of the break-up of 
feudal Europe, at the beginning of a modern world in which the old 
feudal institutions were still holding on with the tenacity that 
the vested interests have always shown. It was against these vested 
interests that he wrote. And the result is that his book has not been 
merely for library shelves. It has gone through many editions, and 
has been translated into almost every language. Those who read it 
were chiefly those who stood to profit from its view of the world — 
the rising class of businessmen, their political executive committees 
in the parliaments of the world, and their intellectual executive 
committees in the academies. Through them it has had an enormous 
influence upon the underlying populations of the world, although 
generally all unknown to them. And through them also it has had 
an enormous influence upon economic opinion and national policy. 
It has done as much perhaps as any modern book thus far to shape 
the whole landscape of life as we live it today. ^ 

WTio was the man who could do all this? .A.t first glance .\dam 
Smith appears only as a mild, Scottish professor of moral philos- 
ophy, retiring and absent-minded, a gentle sage with d ynam ite flow- 
ing from his pen. His career had nothing extraordinary in it, e.xcept 
that at three he was carried off by a band of gypsies, and only with 
difficulty restored to his family. But whatever other adventure the 
rest of ’Vs life held for him was to lie in the dangerous voyage of 
the mind rather than in the glories or disasters of an adventurous 
outward career. He had the traditional Scottish boyhood in a frugal 
fairiily; spent the traditional years at Oxford — years which served 
as the basis for the caustic attack on universities which is to be 
found in these pages; cooled his heels for the traditional period 
while he. waited for a suitable university appointment; was made 
professor of logic and then professor of moral philosophy'at Glas- 
gow, giving lectures on .-theology, ethics, jurisprudence and po- 
litical economy to students who probably cared more about their 
careers in the rising merchant class than they did about njoral phi- 
'Idsophy; wrote a book called The Theory of M or al^ Sentiments, 
which made something of a splash at the time, and since it ex- 


plained the social psychology of human behavior in terms of the 
sentiment of sympathy, got itself much talkpd about and read in’ 
polite circles throughout the British Isles; gave up his university 
post to go as traveling tutor to the stepson m the famous colonial- 
baiter, Charles Townshend — the •young Duke of Buccleugh, and 
spent a year and a half at Toulouse and a year at Paris with him; 
began, while on the trip, a treatise on economics, completing it ten 
years after his return fo Scotland; finally published his treatise in 
1776 under the title of The Wealth of Nations; and spait the rest 
of his life as commissioner of customs at Edinburgh, living (Juietly 
with his mother and a maiden cousin.* 

That is one version of Adam Smith, and it is true enough — for" 
a half-truth. But there is another half-truth needed* to coiiplete the ’’ 
picture. Adam Smith was always alive to what was going on in the 
world. He was heterodox enough to remember with passion the futil- 
ity of the ordinary university teaching, as he*had experienced it at ' 
Oxford. In his own teaching, while he had no eloquence, he could 
communicate to his students his own fervor for ideas. Of his lectures 
on jurisprudence, John Rae, his biograTpher, tells us that the course 
“taught the young people to think. His opinions became the sub- 
jects of general discussion, the branches he lectured upon became 
fashionable in the town . . . stucco busts of him appeared in the book^ 
sellers’ windows, and the very peculiarities, of Ws voice and pro- 
nunciation received the homage of imitation.” The doctrine that 
he was teaching was, it must be remembered, new doctrine — ^that of 
economic liberalism and freedom from governmental interference. • 
•To it were attached therefore at.pnce the obstacles and advantages 
of new doctrine ; it met with the Bbstility of the entrenched and the 
salvos of those who stood to gain by innovation. Smith himself was 
by no means a recluse. The^^utorship that was offered him was 
lucrglive, and yet there was a gamble in leaving his university chair. ' 
That he did so is evidence of his restless desire to expjjjjre the 
bounds of th 5 new European society. He was a friend orpunie, 
and in France he found in addition Quesnay, Turgot, D’.Alembert, 
Helvetius — the physiocrats who were fashioning a new and exciting 
economic science, and the philosophes who were constructing out of 
the materials of the rational life instruments for shattering encum- 
bejing and irrational institutions. -Sjnith kept his eyes and cars 
open; heJsept his notebooks ready; he kept his wits with him. He 
started to write up his lectures on political economy, as he had 
formerly written up his lectures on moral philosophy. But this was 
a different matter. 1\ wasn’t merely the business of going back to 
first princUples, and then spinning the rest out of one’s philosc^hic* 
entrails. Hertf was something that gave order and meaning to the 


newly emerged world of commerce and the newly emerging world of 
^industry. Here was something that could be used in fighting the 
clumsy and obstructiw v^tiges of a society governed by a feudal 
aristocracy. Smith trembled with anticipation, and could not help 
communicating "his excitement to his friends. They too trembled — 
and waited. Smith took ten more years. He could not be hurried in 
this task. He had to read and observe further. He poked his nose 
into old books andmew factories. He got led off on long e.xcursions 
into the history of silver coinage, the economics of ecclesiastical 
institutions, the whole cultural history of Europe. He had to polish 
his style, but, more important, he had to fashion and carry through 
'consistently a new way of looking at things — the hard-bitten eco- 
nomic viewpoint. He had, above all else, to avoid making his book 
mereljt a theoretical construction; it must deal with the burning 
issues of national and international economic policy of his day. 
When the book was finished, therefore, it was more than a book; it 
was the summary of a new European coiisciousness. 

^ You will find the basic principles that Smith embodied in his 
book ^xplained in all the histories of economic thought. What you 
will not find is the skill, the charm, the greatness with which he 
wove them in|ji the fabric of his chapters. The principles are simple. 
First, Smith assumes that the prime psychological drive in man as 
an economic being is the drive of self-interest. Secondly, he assumes 
the existence of a natural order in the universe wTiich makes all the 
individual strivings for self-interest add up to the social good. 
Finally, from these postulates, he concludes that the best program 
is to leave the economic process severely alone — what has come to be 
known as laissez-faire, economic liberalism, or ngn-inte rventionism. 

.Ml this is now familiar enough. Largely through Smith’s book it 
has made itself a part of the strusAure of our often unconscious be- 
liefs, and is only now beginning^o be dislodged. Of Smith's first 
postulate it must be said that while it is largely an abstraction from 
e.xperier.ce, as tte institutional school of economists Have delighted 
to point out, the experience from which it is abstracted does much 
to^verify it. The view which makes of man an economic automaton 
is obviously oversimplified. But the view which makes out of him a 
hard-headed and predatory seeker of his own gain is, as we look 
back at the history of business enterprise, largely justified. What 
we hav^ learp^d, of course, is that it is not an inherent or •universal 
trait, but part of an historical method of organizing economic life. 
As for Smith’s second postulate — that .there is a “natural order,’’ 
whereby the pursuit by each individual of his own self-intbrest con- 
tributes ultimately to the social welfare, that must lie outside the 
realm of science or of historical verification, and musf be set down 



as a cardinal p rinciple nf ihp faith of the age. As Carl Becker has 
pointed out, the^'natural order” which the ejghteenth-century phi- , 
losophers postulated in order the better to ^ght the ecclesiastical 
institutions and the political obscurantism of their day became 
itself a source of a quasi-theological faith and of obscurantism. 

The conclusion that Smith drew from these postulates was simple 
enough. Since a natural order exists whereby the enlightened selfish- 
ness of all men adds up to the maximum good of'society, since there 
is a “divine hand” which guides each man in pursuing hie own gain 
to contribute to the social welfare, it must follow that government 
is superfluous except lo piresc rve ordet and perform routina func- 
tions. TBe~best government is the government that governs least,' 
The best economic policy is that which arises from the spontaneous 
and unhindered action of individuals. We recognize this, of Course, 
as the unregulated and individualistic capitalist economy — ^what 
Carlyle has unforgettably termed “a narc hy plus a constable.” 

One warning is neceSSary. We must not conclude, because 
Smith’s intellectual system can be presented in an orderly sequence 
from postulates to conclusion, that he arrived at it by th^same 
sequence. It is much more likely, as with almo^ all intellectual con- 
structions, that instead of Smith’s program flowing ^om his prin- 
ciples, it was his principles that flowed from his program. He did not 
start w'ith truths about human behavior and the natural order, and 
arrive at economic liberalism. John Maurice ^ark suggests that his 
S]^tem can be best understood^ terlhs of what he was reacting 
against. And it is true that Smithwystem of thought took its shape 
*from his intense reaction agrdns^llie elaborate apparatus of controls 
which the surviving feudal and mercantilist institutions were still 
imposing on the individual. The need for removing these controls 
was Smith’s underlying theme. Aaid it was the response which this 
theme met from the mercantile and industrial class of Europe thaj 
gave The Wealth oj Nations its enormous impact upon Western 
thought and ^'estern institutions. Harold Laski has demonstrated, 
in his Rise of Liberalism, how Smith’s arguments fitted in with the 
prevailing middle-class temper in Europe. The businessmen we,re 
delighted. “To have their own longings elevated to the dignity -of 
natural law was to provide them with a driving force that had never 

bef«re beeniso powerful With Adam Smith the practical maxims 

of business enterprise achieved the status of a theology.” * 

But there is another side of the shield, Smith was, to be sui!^ 
an unconscious mercenary in the service of a rising capitalist'class 
in Europe. It is true that he gave a new dignity to greed and a new 
sancUfipation to the predatory impulses. It is true that h^ rational- 
ize^tM economic interests of the class that was coming to powef in 



such -a way that he fashioned for that class a panopl^y of ideas be- 
.hind which they are sjill protecting themselvesapinst the assaults 
of "government regula|:ion and the stirrings for socialization. It is 
true that Smith’s economic individualism is now being used to op- 
press where once it was used to liberate, and that it now entrenches 
the old where once it blasted a path for the new. But it must be said 
for Smith that his doctrine ha^ been twisted in ways he would not 
have apptoved, and used for putposes and causes at which he would 
have been* horrified. 

Adam Smith was, in his owjrday and his own way, something of 
a revolutionary. His doctrifie revolutionized European society as 
"siirely as Marx’§ in a later epoch. He was, on the economic side, the 
philosopher of the capitalist revolution, as John Locke was its phi- 
losopher on the political side. His own personal sympathies were not 
. entirely with the capitalist. Eli Ginzberg has pointed out, in his 
House of Adam Smith, how there runs through The Wealth of Na- 
tions a strain of partisanship for appi'entices and laborers, for 
farmers, for the lowly and oppressed everywhere, and a hostility to 
the business corporations, the big-businessmen of the day, the ec- 
clesiasts and the aristocrats. Read the book with an eye for these 
passages, ancf it becomes a revealing document showing Smith’s 
concern for die common man. Far more important, of course, than 
any of these more or less sentimental expressions of sympathy, is 
the doctrine of labor value which is at the core of Smith's eco- 
nomics. In enunciating for first ti me the doctrine, th^t labnH s 
the sole source of value in_rnTnninditi>s, .knvhh hpram e the fnj-j; - 
runner of Bray and Hodgskin and eventu ally of Marx. As an origi-‘ 
nator. Smith developed this doctrine clumsily. It remained for iMarx 
to refine it, convert it into an instrument of analysis, extract from 
it the revolutionary implications that were inherent in it from the 
start. This leads us, however, much too far afield. On Smith’s rela tion 
to the labor theory of value there is a large and polemical literature. 
On the validity or confusion of the theory itself there is a literature 
even larger and more polemical. 

, All that concerns us is to see the curious paradox of Smith’s posi- 
tion in history, to have fashioned his system of thought in order to 
blast away the institutional obstru^pps from the past, and bring a 
greater^ degree of economiB|jfeed8m and therefore a greater tatal 
v'calth for all- the piip|^i^f^''hation; and yet to have hatd his doc- , 
trine result in the glorification of economic irresponsibility and the 
entrtachment of the middle class in power. A reading of Adam 
^Smith’s work and a study of its place in the history of idfeas should 
be one of the best solvents for smugness and intellectual absfflutism; 



Introduction to the Modern Library Edition by 

Lerner V 

Preface xix- 

Editor’s Introduction xxiii 

Introduction and Plan of the Work Ivii 


Of the Causes of Improvement in the productive Powers of 
Labour, and of the Order according to which its-Produce 
is naturally distributed among the different Ranlfis of the 
People 3 


• Of Ike Division of Labour 3 


Of the Principle which gives Occasion to the Division of Labour 13 

That the Division of Labour is limiled by the Extent of the Market 17 

Of the Origin and Use of Money ' , sj 

_ I 



Of the real and nomijial Price of Commodities, or of their Pric^ 

I in iflAour, and their Price in M oney 








• t 

Of Ihe component JPar/i of the Price of Commodities 47 


Of the natural and market Price of Commodities 55 


Of tke^ages of Labour ' 64 



Of the Profits of Stock 87 


Of Wages and Profit in the different Employments of Labour and 

Stock QQ 

Past 1 . Inequalities arising from the Nature of the Employ- 
ments themselves xoo 

Part IL Inequalities occasiotted by the Policy of Europe 118 


Of the Rent of Land 144 

Part I. Of the Produce of Land which always affords Rent 146 
Part II. Of the Produce of Land whfxh sometimes does, and 
sometimes does not, afford Rent 161 

Part III. Of the Variations i^the Proporlton between the re- 
spective Values of that Sort of Produce which always affords 
Rent, and of that which sometimes does and sometimes does 
not afford Rent iy4 

Digression concerning the Variations in the Value of Silver 
during the Course of the Four Ifist Centuries. 

First Period 

Second Period 10 1 

Third Period 

Variations in the Proportion between the respective Values' of 
Gold and Silver * « t 

Grounds of the Sttspicion that the Value of Silver still contiiAus 

to decrease , 216 

Dtffe^em Effects of the Progress of Impreventenl upon the real 

Price of three different Sorts of rude Produce “ 217 



First Sort 
Second Sort 

Thud Sort ' 

Conclusion of the Digressiolt cofiqerning the Variations if' we 
Value of Silver 

Effects of the Pi ogress of mpovernent upon the real Pripe of 
Conclusion of the Chapter 


218 ^ 







Of the Nature, Accuitfulation, and Emifloyment of Stock 
Introduction ^59 


Of the Division of Stock 



Of Money considered as a particular firanch of the general Slock 
of the Society, or of the P^paice of maintaining the National 

chapter III 

Of the Auumulalion of Cdpilol, or of poduciive and ufpo- 
ductive Labour ^ * 


O^tock lent at Interest 



Of thejiifferent Employmeh^ of Capitals 

341 * 

. xiv 




Of the different Progress M Ojpulence in different Nations 

Of the Natural Progress of Opvlence 


Of the Discouragement of Agriculture in the ancient State of 
Europe after the Fall of the Roman Empire 


Of the Rise and Progress of Cities and T owns, after the Fall of the 

Roman Empire 373 




How the Commerce of the Towns contributed to the Improvement 

of the Country 384 


Of Systems of political (Economy 
Introduction , 



Of the Principle of the commercial, or mercantile System 398 


Of Restraints upon the Importation from foreign Countries of 
such Goods as can be produced at Home 






'^/ the extraordinary Restraints upon the Importation oj Goods of 

almost all Kinds, from those Cq^ntries with which the 
Balance is supposed to be disaUvantageous 44c 

Part I. Of the Unreasonableness of those Restraints even upon 

the Principles of the Commercial System ' 440 

Digression concerning Banks of Deposit, particularly concerning 

that of Amsterdam * , 446 

Past II. Of the Unreasonahleness of those extraordinary 

Restraints upon other Principles * ‘455 


Of Drawbacks 466 


Of Bounties 472 

Digression concerning the Corn Trade and Com Laws 49a 


Of Treaties of Commerce 511 


Of Colonies 523 

P.AET I. Of the Motives for establishing new Colonies 523 

Part II. Causes of the Prosperity of New Colonies 531 

Past IH. Of the Advantages which Europe has derived from 
the Discovery of America, and from that of a Passage to the 
East Indies by the Cape of Good Hope 557 



Conclusion of the Mercantile System 607 


Of the Agricultural Systems, or of those Systems of Political 
(Economy, which represent the Produce' of Land, as either • 
the sde or the pAncipal Source of the Revenue and WeaUh 
of^vefy Country 627 





Of the Revenue of the Sovereign or Commonwealth 

Of the Expences of the Sovereign or Commonwealth 653 

Past I. Of the Expence of Defence 653 

Part II. Of the ^xpence of Justice 669 

Par];, HI! Of the Ex pence of Public Works and Public 

Institutions 681 

Article ist. Of the Public Works and Institutions for facili- 
tating the Commerce of Society. 

ist, For facilitating the general Commerce of the 

Society 6S2 

2dly, For fficilitating particular Branches of Com- 
merce 690 

Article 2d. Of the Expence of the Institutions for the Educa- 
tion of Youth •jib 

Article 3d. Of the Expence of the Institutions for the Instruc- 
tion of People of all Ages 740 

Part IV. Of the Expence of supporting the Dignity of the 

Sovereign 766 

Conclusion of the Chapter 767 


Of the Sources of the general or public Revenue of the Society 709 
Part I. Of the Funds or Sources of Revenue which may pecu- ' 
liarly belong to the Sovereign or Commonwealth 769 

Part II. Of Ta.xes 777 

Article ist. Taxes upon Rent; Taxes upon the Rent of Land 779 
Taxes which are proportioned, not to the Rent, but to the Produce 

of Land 788 

Taxes upon the Rent of Uouses 791 

Article 2d. Taxes upon Profit, or upon the Revenue arising 

from Stock 798 

T axes upon the Profit of parlictdar Employme 7 its 803 

Appendix to Articles ist and 2d. Taxes upon the Capi- 
tal Value of Lands, Houses, and Stock '.t'-- 809 

Articee 3d. Taxes upon tlte Wages of Labour , "^15 

Article 4th. Taxes which, it is intended, should fall indiffer- ' 
ssntly upon every different Species of Revenue 818 

Capitation Taxes 819 

* Taxes upon consumable Commodities 821 





Of public Debts 859 

Appendix on the Herring Bounty 

Index I. Subjects 907 

Index II. Authorities 971 

[From “Introduction and Plan of the Werk” to "Public Debts,” tlje Con- 
tents are printed in the present edition as they appeared in eds. 3-5. Eds. i 
and 2 neither enumerate the chapter “Conclusion of the Mercantile Sys- 
tem,” nor divide Bk. V., ch i , Pt. hi., Art. ist into sections, since the chap- 
ter and one of the two sections appeared first in ed. 3. Eds i and 2 alM 
read “Inequalities in Wages and Profits arising from the Nature of the dif- 
ferent Employments of both” at Bk. I., ch. x., Ft.>t.] 


The text of the present edition is copied from that of the fifth', the 
last published before Adam Smith’s death. The fifth edition has 
been carefully collated with the first, and wherever the two were 
found to disagree the history of the alteration has been traced 
through the intermediate editions. With some half-dozen utterly 
insignificant exceptions such as a change of “these” to “tho^,” 
“towards” to “toward,” and several haphazard substitutions of 
“conveniences” for “conveniencies,” the results of this collation are 
all recorded in the footnotes, unless the difference between the edi- 
tions is quite obviously and undoubtedly the consequence of mere 
misprints, such as “is” for “it,” “that” for “than,” “becase” for 
“because.” Even undoubted misprints are recorded if, as often 
happens, they make a plausible misreading which has been copied 
in modem texts, or if they present any other feature of interest. 

As it does not seem desirable to dress up an eighteenth century 
classic entirely in twentieth century costume, I have retained the 
spelling of the fifth edition and steadily refused to attempt to make 
•it consistent with itself. The danger which would be incurred by 
doing so may be shown by the example of “Cromwel.” Few mod- 
ern readers would hesitate to condemn this as a misprint, but it is, 
as a matter of fact, the spelling affected by Hume in his History, 
and v/as doubtless adopted from him by Adam Smith, though in the 
second of the two places where the name is mentioned inadvertence 
or the obstinacy of the printers allowed the usual “Cromwell” to 
appear till the fourth edition was reached. I have been equally rig- 
id in following the original in the matter of the use of capitals and 
italics, except that in deference to modern fashion I have allowed 
the initial words of paragraphs to appear in small letters instead of 
capitals, the chapter headings to be printed in capitals instead of 
italics, an^ the abbreviation “Chap.” to be replaced by “Chapter’’ 
in full. I have also allowed each chapter to begin on a fresh page, 
as the old practice of beginning a new chapter below the end ofcthe 
preceding ^ne is inconvenient to a student who desires to use the 
book fqf reference. 


Ift writing a marginal summary for the text I have felt like an 
architect commissioi^sd to place a new building alongside some an- 
cient masterpiece; I have endeavoured to avoid on the one hand an 
impertinent adoption of Smith’s words and style, and on the other 
an obtrusively modem phraseology which might contrast unpleas- 
antly with the text. 

The original index, with some slight unavoidable changes of ty- 
pography, is reprihted as it appeared in the third, fourth and fifth 
editions. I have added to it a large number of new articles and ref- 
erences. I have endeavoured by these additions to make it absolute- 
ly complete in regard to ndmes of places and persons, except that 
it seemed useless to include the names of kings and others when 
used merely to indicate dates, and altogether vain to hope to deal 
comprehensively with “Asia,” “England,” “Great Britain” and 
“Europe.” I have inserted a few catchwords which may aid in the 
recovery of particularly striking passages, such as “Invisible 
hand,” “Pots and pans,” “Retaliation,’^ “Shopkeepers, nation of.” 
I have not thought it desirable to add to the more general of the 
headings in the original index, such as “Commerce” and “Labour,” 
since these might easily be enlarged till they included nearly every- 
thing in Authorities expressly referred to either in the 
texl or the Author’s notes are included, but as it would have been 
inconvenient and confusing to add references to the Editor’s notes, 
I have appended a second index in which all the authorities re- 
ferred to in the text, in the .Author’s notes, and in the Editor’s notes 
are collected together. This will, I hope, be found useful by stu- 
dents of the history of economics. • 

The Author’s references to his footnotes are placed exactly where 
he placed them, though their situation is often somewhat curiously 
selected, and the footnotes themselves are printed exactly as in the 
fifth edition. Critics will probably complain of the trivial character 
of many of the notes which record the result of the collation of the 
editions, but I would point out that if I had not recorded all the 
differences, readers would have had to rely entirely on my expres- 
sion of opinion that the unrecorded differences were of no interest. 
The evidence having been once collected at the expense of very 
considerable labour, it was surely better to put it on record, espe- 
cially as these trivial notes, though numerous, if collected together 
would' not occupy more than three or four pages of yie present 
work. Moreover, eis is shown in the Editor’s Introduction, the most 
trivial of the differences often throw interesting light upon Smith’s 
way of regarding and treating his work. 

The oiher notes consist chiefly of references to sourdbs cf Adam 



Smith’s information. Where he quotes his authority by name, no 
difficulty ordinarily arises. Elsewhere there |is often little doubt . 
about the matter. The search for authorities, has been greatly fa- 
cilitated by the publication of Dr. Jgonar’s Catalogue of the Li- 
brary of Adam Smith in 1894, and of .\dam Smith’s Lectures 
1896. The Catalogue tells us what books Smith had in his posses- 
sion at his death, fourteen years after the Wealth of Nations was 
published, while the Lectures often enable us to say that a par- 
ticular piece of information must have been taken from a book 
published before 1763. As it is known that Smith used the Advo- 
cates’ Library, the Catalogue of that library, of which Part I.I was 
printed in 1776, has also been of some use. Of course a careful com- 
parison of words and phrases often makes it certain that a particu- 
lar statement must have come from a particular source. Neverthe- 
less many of the references given must be regarded as indicating 
merely a possible source of information or iifspiration. I have re- 
frained from quoting or referring to parallel passages in other auth- 
ors when it is impossible or improbable that Smith ever saw them 
That many more references might be given by an editor gifted with 
omniscience I know better than any one. To discover a reference 
has often taken hours of labour: to fail to discover ^ne has.often 
taken days. . * 

When Adam Smith misquotes or clearly misinterprets his au- 
thority, I note the fact, but I do not ordinarily profess to decide 
whether his authority is right or wrong. It is neither possible nor 
desirable to rewrite the history of nearly all economic institutions 
*nd a great many other institutions in the form of footnotes to the 
Wealth of Nations. 

Nor have I thought well to criticise Adam Smith’s theories in the 
light of modern discussions. I would beseech any one who thinks 
that this ought to have been done to consider seriously what it 
would mean. Let him review the numerous portly volumes which 
modern inquiny has produced upon every one of the immense num- 
ber of subjects treated by Adam Smith, and ask himself whether 
he really thinks the order of subjects in the Wealth of Nations a 
convenient one to adopt in an economic encyclopredia. The book is 
surely a classic of great historical interest which should not Jje over- 
Igid by the opinions and criticisms of any subsequent moment — 
stiiriess of any particular editor. 

Much of the heavier work involved in preparing the present edi- 
tion, especially the collation of the original editions, has been ^one 
by my frifnd Mrs. Norman Moor, without whose untiring assis- 
tance tjje book could not have been produced. 



Numerous friends have given me the benefit of their knowledge 
of particular points, ^d mv hearty thanks are due to them. 

E. C. 

London Scboot of Econouics, 1904 


■^The first edition of the Wealth of Nations was published oh the 9th 
of March/ 1776, in two volumes quarto, of which the first, con- 
taining Bucks I.. II. and III., has 510 pages Q^ text, and the second, 
containing Books Dh and V., has s87jThe title-page describes the 
author as “Adam Smith, LL.D. and F.R.S. Formerly Professor of 
Moral Philosophy in the University of Glasgow.” There is no pref- 
ace or index. The whole of the Contents are printed at the begin- 
ning of the first volume. The price was ii 
The second edition appeared early in 1778, priced at £2 2S.,® but 
differing little in appearahee from its predecess\)r. Its pages very 
nearly correspond, and the only very obvious difference is that the 
Contents are now divided between the two volumes. There are. 
hmvever, a vast number of small differences between the first and 
second editions. One of the least of these, the alteration of “late” to 
“present,” ^ draws our attention to the curious fact that writ^g at 
some time, before the spring of 1776 Adam Smith thought it safe to 
refer to the American troubles as “the late disturbances.’’ ° We can- 
not tell whether he thought the disturbances were actually over, or 
only that he might safely assume they would be over before the 
•book was published. .Vs “present disturbances” also occurs close to 
“late disturbances,” ne may perhaps conjecture that when correct- 
ing his proofs in the winter of 1775-6, he had altered his opinion 
and only allowed “late” to stand by an oversight. A very large pro- 
portion of the alterations aie merely verbal, and made for the sake 
of greater elegance or propriety of diction, such as the frequent 
change from ‘^ear and wear’’ (which occurs also in Lectures, p. 208) 
to the more ordinary “wear and tear.” Most of the footnotes appear 
first in the second edition, A few corrections as to matters of fact 
are made, such as that in relation to the percentage of the tax on 
silver in Spanish America (p. 169) . Figures are corrected on p. 328, 
an^pp. 838, 842. New inforifiation is added here and there: an ad- 

‘ John Rae, Life of Adam Smith, 1895, p. 284, 

^Ibid., p. 285. 

“/fi/rf., p. 324. 

* Below, pp. 463, S(jo» 

’ See p. 3^4, as well as the passages referred to in the previous note, 
°Pp.? 4 i> SS2. S81. 


«iv editor's introduction 

ditiohal way of raising money by fictitious bills is described in the 
'long note on p. 295; f.he details from Sandi as to the introduction 
of the silk manufactute into Venice are added (p. 381) ; so also are 
the accounts of the tax on servants in Holland (p. 809), and the 
mention of an often forgotten but important quality of the land- 
tax, the possibility of reassessment within the parish (p. 796). 
There are some interesting alterations in the theory as to the emer- 
gence of profit an 5 rent from primitive conditions, though Smith 
himself would probably be surprised at the importance which some 
modern inquirers attach to the points in question (pp. 47-50). On 
pp. 97, 98, the fallacious argument to prove that high profits raise 
prices more than high wages is entirely new, though the doctrine 
itself is asserted in another passage (p. 565). The insertion in the 
second edition of certain cross-references on pp. 193, 312, which do 
not occur in the first edition, perhaps indicates that the Digressions 
on the Corn Laws and the Bank of Amsterdam were somewhat late 
additions to the scheme of the work. Befer is a necessary of life in 
one place and a luxury in another in the first edition, but is no- 
where a hecessary in the second (pp. 432, 822) . The epigrammatic 
condemnation of the East India Company on pp. 602-3, appears 
first in the.second edition. On p. 751. we find ‘'Christian’' substi- 
tuted for "Roman Catholic,” and the English puritans, who were 
"persecuted" in the first edition, are only “restrained" in the 
second (p. 555) — defections from the ultra-protestant standpoint 
perhaps due to the posthumous working of the influence of Hume 
upon his friend. 

Between the second edition and the third, published at the end* 
of 1784,^ there are considerable differences. The third edition is in 
three volumes, octavo, the first running to the end of Book II., 
chapter ii., and the second from that point to the end of the chapter 
on Colonies, Book IV., chapter viii. The author by this time had 
overcome the reluctance he felt in 1778 to have his office in the 
customs added to his other distinctions'* and consequently appears 
on the title-page as “Adam Smith, LL.D. and F.R.S. of London and 
Edinburgh; one of the commissioners of his ilajesty’s Customs in 
Scotland; and formerly professor of Moral Philosophy in the Uni- 
versity of Glasgow.” The imprint is “London: printed for A. Stra- 
han; and T. Cadell, in the Strand.” This edition was sold at^ne 
guinea.® Prefixed to it is the following "Advertisement to^e Third 
Edition”: — 


'Rae, Lift of Adam Smith, p. 362. 

» Ibid., p. 323. 


* editor’s introduction 

“The first £|(]ition of the following Work was printed in the eiid of 
the year 1775, and in the beginning of the yjar 1776. Through the* 
greater part of the Book, therefore, whenever the present state 'of 
things is mentioned, it is to be understood of the state they were in, 
either about that time, or at some earlier period, during the time I 
was employed in writing the Book. To tl)is“ third Edition, however, 

I have made several additions, particularly to the chapter upon Draw- 
backs, and to that upon Bounties; likewise a nq,w chapter, entitled, 
The Conclusion of the Mercantile System; and a new article to the 
chapter upon the expences of the sovereign. In all these additions, 
the present state of things means always the state in which they were 
during the year 17S3 and the beginning of the present" year 1784.” 

Comparing the second and the third editions we find that the 
additions to the third are considerable. As the Preface or “Adver- 
tisement” just quoted remarks, the chapter entitled “Conclusion of 
the Mercantile System” (pp. 607-26) is entirely new, and so is the 
section “Of the Public Works and Institutions which are necessary . 
for facilitating particular Branches of Commerce” (pp. 690-71.6). 
Certain passages in Book IV., chapter iii., on the absurdity of the 
restrictions on trade with France (pp. 440-1 and 462-3), the three 
pages near the beginning of Book IV., chapter iv., upon the details 
of various drawbacks (pp. 466-70), the ten paragraphs o& the 
herring fishery bounty (pp. 485-9) ■«'ith the appendix on the same 
subject (pp. 901-3), and a portion of the discussion of the effects 
on the corn bounty (pp. 475-6) also appear first in the third edi- 
tion. With several other additions and corrections of smaller size 
^hese passages were printed separately in quarto under the title of 
“Additions and Corrections to the First and Second Editions of Dr. 
Adan^ Smith's Inquiry into the Nature and Causes of the Wealth 
of Nations.” Writing to Cadell in December, 1782, Smith 
says: — 

“I hope in lyo or three months to send you up the second edition 
corrected in many places, with three or four very considerable addi- 
tions, ehieny to the second volume. Among the rest is a short but, 1 
flatter myself, a complete history of all the trading companies in Great 
Britain. These additions I mean not only to be inserted at their proper 
places into the new edition, but to be printed separately and to be sold 
for a shilling or half a crown to the purchasers of the old edition. 

•• . 

’“Edition*4 alters “this” to “the." 

” Edition 4 omits “present.” 

“They arc frequently found the end of existing bound copies obthe 
second edition. The statement in Rae, Life of Adam Smith, p. 362, that they 
were publisfied in 1783 is a mistake; cp. the “Advertisement to the Third 
Edition”* abSve. 

Hvi editor’s introduction ‘ 

The price must depend on the bulk of the additions whjn they are all 
‘ written out.” ” | 

Besides the separately printed additions there are many minor 
alterations between the second and third editions, such as the com- 
placent note on the adoption of the house tax (p. 795), the correc- 
tion of the estimate of possible receipts from the turnpikes (p. 685, 
note and the reference to the expense of the American war (p. 
S76), but none of these is of much consequence. More important is 
the addition of the lengthy index surmounted by the rather quaint 
superscription “N.B. The Roman numerals refer to the Volume, 
and the figures to the Page.” We should not expect a man of 
Adam Smith’s character to make his own index, and we may be 
quite certain that he did not do so when we find the misprint 
“talfie” on p. 787, reappearing in the index (j.u. hlontauban) 
though “taille” has klso a place there. But the index is far from 
suggesting the work of an unintelligent hack, and the fact that the 
“Ayr bank” is named in it {s.v. Banks), though nameless in the 
text, show’s either that the index-maker had a certain knowledge of 
Scotch banking history or that Smith corrected his work in places. 
That Smith received a packet from Strahan “containing some part 
of the index” on 17th November, 1784, we know from his letter to 
Cadell, published in the Economic Journal for September, 1898. 
Strahan had inquired w'hether the index was to be printed in quarto 
along with the Additions and Corrections, and Smith reminded him 
that the numbers of the pages would all have to be altered “to 
accommodate them to either of the two former editions, of which^. 
the pages do not in many places correspond.” There is therefore no 
reason for not treating the index as an integral part of the book. 

The fourth edition, published in 1786, is printed in the same 
style and with exactly the same pagination as the third. It reprints 
the advertisement to the third edition, altering, however, the phrase 
“this third Edition,” into “the third Edition,” and “tbe present year 
1784” into “the year 1784,” and adds the following ".\dvertise- 
ment to the Fourth Edition”: — 

“In this fourth Edition I have made no alterations of any kind. I 
now’, however, find myself at liberty to acknowledge my very great 
obligations to Mr. Hexry Hop “ of Amsterdam. To that Gentleman I 

»■ S. 

“Rae, Life of Adam Smith, p. 362. • 

” Coi -ected to “Hope” in edition 5. The celebrated firm of Hope, mer- 
chant-bankers in Amsterdam, w’as founded by a Scotchman in the seven- 
teenth century (see Sir Thomas Hope in the OictioKary of National Biogra- 
phy). Henry Hope was born in Boston, Mass., in 1736, and passed six years 
.m a banking house in England before he joined his relatives in* Amsterdam- 

* editor’s introduction *xvii 

owe the most distinct, as well as liberal information, concerning a veiy 
interesting and important subject, the Bank of Amsterdam ; of whifh 
no printed account had ever appeared to me satisfactory, or even in- 
telligible. The name of that Gentleman is so well known in Europe, 
the information which comes from him must do so much honour to 
whoever has been favoured with it, and my vanity is so much inter- 
ested in making this acknowledgment, that I can no longer refuse my- 
self the pleasure of prefixing this Advertisement to this new Edition 
of my Book.” 

In spite of his statement that he had made no alterations of any 
kind, Smith either made or permitted a few trifling alterations be- 
tween the third and fourth editions. The subjunctive is very fre- 
quently substituted for the indicative after “if,” the phrase “if it 
was” in particular being constantly altered to “if it were.” On p. 
70, note 23, “late disturbances” is substituted for “present disturb- 
ances.” The other differences are so trifling that they may be mis- 
readings or unauthorised corrections of the printers. 

5 The fifth edition, the last published in Smith’s lifetime and con- 
sequently the one from which the present edition has been copied, 
is dated 1789. It is almost identical with the fourth, the only dif- 
ference being that the misprints of the fourth edition are corrected 
in the fifth and a considerable number of fresh ones introduced, 
while several false concords — or concords regarded as false — are 
corrected (seepp. 106, 682, 716).^® 

I It is clear from the passage on p. 643, that, Smith regarded the 
/title “An Inquiry into the Nature and Causes of the Wealth of 
[ l^ations” as a synonym for “political oeconomy,” and it seems per- 
haps a little surprising that he did not call his book “Political 

He became a partner with them, and on the death of Adrian Hope the 
conduct of the whole of the business of the firm devolved upon him. When 
the French invaded Holland in 1794 he retired to England. He died on 25th 
February, i8ii, leaving fi, 160,000 (Gentleman’s Magazine, March, 1811) . 

“Most modern editions are copied from the fourth edition. Thorold 
Rogers’ edition, however, though said in the preface to be copied from the 
fourth, as a matter of fact follows the third. In one instance, indeed, the 
omission of “so” before “as long as” on p. 41, line 32 (in the present 
edition) , Rogers’ text agrees with that cf the fourth edition rather than the 
third, but this is an accidental coincidence in error; the error is a particular- 
ly easy one to make and it is actually corrected in the errata to the fourth 
editi^pi, so that it is not really the reading of that edition. The fifth edition 
must not b^ confused with a spurious “fifth edition with addition^’ in 2 
vols., 8vo, published in Dublin in 1793 with the “Advertisement” to the 
third edition deliberately falsified by the substitution of “fifth” for “third” 
in the sentence “To this third edition however I have made several addi- 
tions.” It is> perhaps th0 existence of this spurious “fifth edition” which 
has led seve^il writers (e.g., Rae, Life of Adam Smith, p. 293) .to ignore 
the genufhe fifth edition. The axth edition is dated 1791. 


editor’s introduction ‘ 

CEconomy” or “Principles of Political (Economy P But we must re- 
member that the teltn was still in 1776 a very new one, and that 
it had been used in the title of Sir James Steuart’s great book, An 
Inquiry into the Principles of Political (Economy: being an Essay 
on the Science of Domestic Policy in Free Nations, which was pub- 
lished in 1767. Nowadays, of course, no author has any special 
claim tp exclusive use of the title. We should as soon think of 
claiming copyright Jor the title “Arithmetic” or “Elements of Geol- 
ogy” as for “Principles of Political Economy.” But in 1776 .Adam 
Smith may well have refrained from using it simply because it had 
been’ used by Steuart nine years before, especially considering the 
fact that the Wealth of Nations was to be brought out by the pub- 
lishers who had brought out Steuart’s book.^® 

From 1759 at the latest an early draft of what subsequently de- 
veloped intone Wealth of Nations existed in the portion of Smith's 
lectures on '‘Jurisprudence” which he called “Police, Revenue and 
.Arms,” the rest of “Jurisprudence” being “Justice” and the “Laws 
of Nations.” Jurisprudence he defined as “that science whic^ in- 
quires into the .general principles which ought to be_ the loundation 
of the laws of ajl nations,'’^ or as “the theory of the general priii- 
ciples of law and government.” In forecasting his lectures on the 
subject he told his" students 

“The four great objects of law are justice, police, revenue and_arms. 

“The object of justice" is the security from injury’, and it is the 
foundation of civil government. ~ 

'*‘The objects of police areTh^cheapness of commodities, public s^ 
curity, and cleanliness, if the two last were not too minute for a lec- 
ture of this kind. Under this head we will consider the opulence of a 

“It is likewise necessary that the magistrate who bestows his time 
and labour in the business of the state should be compensated for it. 
For this purpose and for defraying the expenses of government some 
fund must be raised. Hence the origin of revenue. Thff subject of con- 
sideration under this head will be the proper means of le\'ying reve- 
nue. which must come from the people by taxes, duties, &c In gen- 
eral, whatever revenue can be raised most insensibly from the people 
ought to be preferred, and in the sequel it is proposed to be shown 
how far the laws of Britain and other European nations are calculated 
for this purpose. „ 

’ Eteuart’s Princiiiks was “printed for A. Millar, and T. Cadell, in the 
Strand ” and the Wealth oj Nations “for W. Strahan; and T. Cadell, in the 

/ . t^ectures on Justice, Police, Revenue and Arm?, delivered i» the Univer- 
Eity of Glasgow by Adam Smith. Reported by a student in 1763, and edited 
v^ith an Introduction and Notes by Edwin Cannan, 1896, pp. i, 3. 

•editor’s introduction 3 Udx 

•^‘As the best Qolice cannot give security unless the government can 
defend themselves from foreign injuries and attajks, the fourth thing 
appointed by law is for this purpose; and undir this head will De 
shown the different species of arms with their advantages and disad- 
vantages, the constitution of standing armies, militias, &c. 

“After these will be considered the laws of nations. . . 

The connection of revenue and arms with the general principles 
of law and government is obvious enough, and no question arises 
as to the explanation on these heads given by the forecast. But to 
“consider the opulence of a state” under the head of “police” seems 
at first sight a little strange. For the explanation we turn to the be- 
ginning of the part of the lectures relating to Police. 

»/^‘Police is the second general division of jurisprudence. The name is 
French, and is originally derived from the Greek iroXtrela, which 
properly signified the policy of civil government, but now it only 
means the regulation of the inferior parts of government, viz.: clean- 
liness, security, and cheapness or plenty.” ” 

That this definition of the French word was correct is well shown 
by the following passage from a book which is known to have been 
in Smith’s possession at his death, 2® Bielfeld’s Institutions poU- 
tiques, 1760 (tom. i.. p. 99). 

“Le premier President du Harlay en recevant M. d’Argenson a la 
charge de lieutenant general do police de la ville de Paris, lui adressa 
■c^ paroles, qui meritent d’etre remarquees: Le Roi, Monsieur, vous 
demande surete, nettete, bon-marche. En effet ces trois articles com- 
prennent toute la police, qui forme le troisieme grand objet de la poli- 
tique pour I’interieur de I’Etat.” 

When we find that the chief of the Paris police in 1697 was ex- 
pected to provide cheapness as well as security and cleanliness, we 
wonder less at t^e inclusion of “cheapness or plenty” or the “opu- 
lence of a state” in “jurisprudence” or “the general principles of 
law and government.” “Cheapness is in fact the same-thing with 
plenty” and “the consideration of cheapness or plenty” is “the same 
thing” as “the most proper way of securing wealth and abun- 
dance” If Adam Smith had been an old-fashioned believqr in 
state control of trade and industry he would have described the 

pp. 3, 4. 

° Lectures, p. 154. 

See JamesJBonar, Catalogue o] the Library o] Adam Smith, 1S94. 

Lecturifs,,p. 157. 

jcK editor’s introduction 

most proper regulations for securing wealth and abundance, and 
there would have been nothing strange in this description coming 
under the “general principles of law and government.” The actual 
itrangeness is simply the result of Smith’s negative attitude— of his 
belief that past and present regulations were for the most part 
purely mischievous. 

The two items, cleanliness and security, he managed to dismiss 
rery shortly: “tfie proper method of carrying dirt from the streets, 
and the execution of justice, so far as it regards regulations for 
preventing crimes or the method of keeping a city guard, though 
useful, are too mean to be considered in a general discourse of this 
kind.” He only offered the observation that the establishment of 
arts and commerce brings about independency and so is the best 
police for preventing crimes. It gives the common people better 
wages, and “in coijsequence of this a general probity of manners 
takes place through the whole country. Nobody will be so mad 
as to expose himself upon the highway, when he can make better 
bread in an honest and industrious manner.’^ 

He then came to “cheapness or plenty, or, which is the same, 
thing, the most proper way of securing wealth and abundance.” 
He began this part of the subject by considering the “natural wants 
of mankind which are to be supplied,” a subject which has since 
acquired the title of “consumption” in economic treatises. Then he 
showed that opulence arises from division of labour, and why this 
is so, and how the division of labour “occasions a multiplication of 
the product,”®® and why it must be proportioned to the extent of 
commerce. “Thus,” he said, “the division of labour is the great cause 
of the increase of public opulence, which is always proportioned to 
the industry of the people, and not to the quantity of gold and 
silver as is foolishly imagined.” “Having thus shown what gives 
occasion to public opulence,” he said he would go on to consider: — 

“First, what circumstances regulate the price of oommodities: 

“Secondly, money in two different views, first as the measure of 
value and then as the instrument of commerce; 

“Thirdly, the history of commerce, m which shall be taken notice 
of the causes of the slow progress of opulence, both in an- 
cient and modern times, which causes shall be shown eitht * 

, to affect agriculture or arts and manufactures: 

p. IS 4 . 

^ Ibid., p. 156. 

'' Lectures, p. 157. 

“/Wd., p. 163. 


• editor's introduction 

“Lastly, the effects of a commercial spirit, on the government, tem- 
per, aRd manners of a people, whetherigood or bad, and the 
proper remedies.”” 

Under the first of these heads he treated of natural and market 
price and of difference of wages, and showed “that whatever police 
tends to raise the market price above the natural, tends to diminish 
public opulence.” Among such pernicious regulations he enumer- 
ated taxes upon necessaries, monopolies, and exclusive privileges of 
corporations. Regulations which bring market price below natural 
price he regarded as equally pernicious, and therefore he com 
demned the corn bounty, which attracted into agriculture Stocli 
which would have been better employed in some other trade. “It is 
by far the best police to leave things to their natural course.” 

Under the second head he explained the reasons for the use of 
money as a common standard and its consequential use as the 
instrument of commerce. He showed why gold and silver were 
commonly chosen and why* coinage was introduced, and proceeded 
to explain the evils of tampering with the currency, and the diffi- 
culty of keeping gold and silver money in circulation at the same 
time. Money being a dead stock, banks and paper credit, which 
enable money to be dispensed with and sent abroad, are beneficial. 
^ The money sent abroad will “bring home materials for food, clothes, 
and lodging,” and, “whatever commodities are imported, just -so 
much is added to the opulence of the country.” -f It is “a bad police 
to restrain” banks.®® Mun, “a London merchant,” affirmed “that as 
England is drained of its money it must go to ruin.” “Mr. Gee, 
likewise a merchant,” endeavoured to “show that England would 
soon be ruined by trade with foreign countries,” and that “in al- 
most all our commercial dealings with other nations we are 
losers.” Mr. Hume had shown the absurdity of these and other 
such doctrines, though even he had not kept quite clear of “the 
notion that public opulence consists in money.” Money is not 
consumable, and “the consumptibility, if we may use the word, of 
goods, is the great cause of human industry.” 

^ibid., pp. 172-3. 

' ” Ibid., p. 178. 

.'. ™ Ibid., p. 182. 

’‘Lectures, p. 192. 

^tbid., p, 195.- 

^Ibid., p. %9S- 

’“Ibid., p. 196. 

> ” Ibid., p. 197. 

Ibid., p. 199. 

xxsii editor’s INTRODUCTION . 

The abi'ird opinion that riches consist in money had given rise 
to “many prejudici^ errors in practice,” such as the prohibition 
of* the exportation oucoin and attempts to secure a favourable bal- 
ance of trade. There will always be plenty of money if things are 
left to their free course, and no prohibition of exportation will be 
effectual. The desire to secure a favourable balance of trade has 
led to “most pernicious regulations,” such as the restrictions on 
trade with France. 

“The absurdity of these regulations will appear on the least reflec- 
tion. All commerce that is carried on betwixt any two countries must 
necessarily be advantageous to both. The very intention of commerce 
is to exchange your own commodities for others which you think will 
be more convenient for you. When two men trade between themselves 
it is undoubtedly for the advantage of both. . . . The case is exactly 
the same betwixt any two nations. The goods which the English mer- 
chants want to import from France are certainly more valuable to 
them than what they give for them."” - 

These jealous es and prohibitions were most hurtful to the rich- 
est nations, and it would benefit France and England especially, 
if “all national prejudices were rooted out and a free and uninter- 
rupted commerce established.” No nation was ever ruined by 
this balance of trade. All political writers since the time of Charles 
II. had been prophesying “that in a few years we would be re- 
duced to an absolute state of poverty,” but “we find ourselves far 
richer than before.” *'■’ 

The erroneous notion that national opulence consists in money 
had also given rise to the absurd opinion that “no home consump- 
tion can hurt the opulence of a country.” 

It was this notion too that led to Law’s Mississippi scheme, com- 
pared to which our own South Sea scheme was a trifle.^^ 

Interest does not depend on the Vcilue of money, but on the quan- 
tity of stock. Exchange is a method of dispensing with the trans- 
mission of money 

Under the third heading, the history of commerce, or the causes 
of the slow progress of opulence, Adam Smith dealt with “first, 
natural impediments, and secondly, the oppression of civil govern- 

“ Ibid., p. 200. 

“ Ibid., p. 204. 

Ibid., p. 204. 

^Lectures, p. 206. 

'"Ibid., p. 207. 

'‘Ibid., p. 209. 

"'Ibid., pp. 211-19. 

'^Ihid-, pp. 219-22. 


, editor’s introduction 

ment.” He is not recorded to have mentioned any ' itural im- 
pediments except the absence of division of» labour in rude and 
barbarous times owing to the want of stock.'*! But on the opprfe- 
sion of civil government he had much to say. At first governments 
w'ere so feeble that they could not offer their subjects that security 
without which no man has any motive to be industrious. After- 
wards, when governments became powerful enough to give internal 
security, they fought among themselves, and their .subjects were 
harried by foreism enemies. Agriculture was hindered by great 
tracts of land being thrown into the hands of single persons. This 
led at first to cultivation by slaves, who had no motive to industry: 
then came tenants by steelbow (metayers) who had no sufficient 
inducement to improve the land; finally the present method of cul- 
tivation by tenants was introduced, but these for a long time were 
insecure in their holdings, and had to pay rent in kind, which made 
them liable to be severely affected by bad seasons. Feudal subsidies 
discouraged indu.stry, the Jaw of primogeniture, entails, and the 
expense of transferring land prevented the large estates from being 
divided. The restrictions on the export of corn helped to stop the 
progress of agriculture. Progress in arts and commerc“ was also 
hindered by sbu-ery, as well as by the ancient contempt for indus- 
try and commerce, by the want of enforcement of contracts, by 
the various difficulties and dangers of transport, by the establish- 
ment of fairs, markets and staple towns, by duties on imports and 
exports, and by monopolies, corporation privileges, the statute of 
apprenticeship and bounties.'*"’ 

, Under the fourth and last head, the influence of commerce on 
the manners of a people. Smith pronounced that “whenever com- 
merce is introduced into any country probity and punctuality al- 
ways accompany it.” The trader deals so often that he finds hon- 
esty is the best policj'. "Politicians are not the most remarkable 
men in the world for probity and punctuality. Ambassadors from 
different nations are still less so,” the reason being that nations 
treat with one another much more seldom than merchants. 

But cert.ain inconveniences arise from a commercial spirit. Men’s 
views are confined, and “when a jjerson’s whole attention is be- 
•stowed on the seventeenth part of a pin or the eightieth part of a 
button,” ■*'’ he becomes stupid. Education is neglected. In Scotland 

“ Ibid , p. gai. 

“ Ibid , pp. 222-3. 

‘^Lectures, pp. 233-36. 

‘“Ibid., p. 2S3. 

"Ibid , p. 454. 

“lbid.,j). 26 S. 

■«xiv editor’s introduction 

the meanest porter can read and write, but at Birmingham boys of 
six or seven can earp threepence or sixpence a day, so that their 
pefrents set them to \^ork early and their education is neglected. To 
be able merely to read is good as it “gives people the benefit of re- 
ligion, which is a great advantage, not only considered in a pious 
sense, but as it affords them subject for thought and specula- 
tion.” There is too “another great loss which attends the put- 
ting boys too soon to work.” The boys throw off parental authority, 
and betake themselves to drunkenness and riot. The workmen in 
the commercial parts of England are consequently in a “despicable 
condition; their work through half the week is sufficient to main- 
tain them, and through want of education they have no amusement 
for the other but riot and debauchery. So it may verj' justly be said 
that the people who clothe the whole world are in rags them- 

Further, commerce sinks courage and extinguishes martial spir- 
it; the defence of the country is handed, over to a special class, and 
the bulk of the people grow effeminate and dastardly, as was shown 
by the fact that in 1745 “four or five thousand naked unarmed 
Highlanders would have overturned the government of Great Bri- 
tain with little difficulty if they had not been opposed by a stand- 
ing army.” 

“To remedy” these evils introduced by commerce “would be an 
object worthy of serious attention.” 

Revenue, at any rate in the year when the notes of his lectures 
were made, was treated by Adam Smith before the last head of po- 
lice just discussed, ostensibly on the ground that it was in reality 
one of the causes of the slow progress of opulence.®® 

Originally, he taught, no revenue was necessary; the magistrate 
was satisfied with the eminence of his station and any presents he 
might receive. The receipt of presents soon led to corruption. At 
first too soldiers were unpaid, but this did not last. The earliest 
method adopted for supplying revenue w’as assignment of lands to 
the support of government. To maintain the British government 
would require at least a fourth of the whole of the land of the coun- 
try. “After government becomes expensive, it is the worst possible' 
method to support it by a land rent.” Civilisation and expensive 
government go together. 

Taxes may be divided into taxes upon possessions and taxes 

"/Wrf., p. 2 s6. 

’ilbid, pp. 256, 257. 

Lectures, p. 258. 

“ Ibid., p. 236. 

^Ibi<L, p. 239. 

• editor’s introduction 

upon commodities. It is easy to tax land, but difficult to tax stock 
or money; the land tax is very cheaply colledted and does not raise* 
the price of commodities and thus restrict tie number of persons 
who have stock sufficient to carry on trade in them. It is hard on 
the landlords to have to pay both land tax and taxes on consump- 
tion, which fact “perhaps occasions the continuance of what is 
called the Tory interest.” 

Taxes on consumptions are best levied by way of excise. They 
have the advantage of “being paid imperceptibly,” since “when 
we buy a pound of tea we do not reflect that the most part of the 
price is a duty paid to the government, and therefore pay it con- 
tentedly, as though it were only the natural price of the commo- 
dity.” Such taxes too are less likely to ruin people than a land 
tax, as they can always reduce their expenditure on dutiable ar- 

A fixed land tax like the English is better than one which varies 
with the rent like the French, and “the English are the best finan- 
ciers in Europe, and their taxes are levied with more propriety than 
those of any other country whatever.” Taxes on importation are 
hurtful because they divert industry into an unnatural channel, 
but taxes on exportation are worse. The common belief that wealth 
consists in money has not been so hurtful as might have been ex- 
pected in regard to taxes on imports, since it has accidentally led 
to the encouragement of the import of raw material and discour- 
agement of the import of manufactured articles.®* 

From treating of revenue Adam Smith was very naturally led 
•on to deal with national debts, and this led him into a discussion of 
the causes of the rise and fall of stocks and the practice of stock- 

Under Arms he taught that at first the whole people goes out to 
war: then only the upper classes go and the meanest stay to culti- 
vate the ground. But afterwards the introduction of arts and manu- 
factures makes it inconvenient for the rich to leave their business, 
and the defence of the state falls to the meanest. “This is our pres- 
ent condition in Great Britain.” ®® Discipline now becomes neces- 
sary and standing armies are introduced. The best sort of army is 
“a militia commanded by landed gentlemen in possession of the 

‘“Ibid., pp. 241, 242. 

‘‘Ibid., pip. 242, 243. 

“ Lectures, p. 243. 

” Ibid., p. 245. 

“ Ibid., pp. 246, 247. , 

’‘Ibid., pp. 247-32. 

” IbidU, p.*26i. 

editor’s introduction » 

public offices of the nation,” which “can never have any prospect 
••of sacrificing the liberties of the country.” This iS the case in 
Sweden. J 

Now let us compare with this the drift of the W calth of Nations, 
not as it is described in the “Introduction and Plan,” but as we find 
it in the body of the work itself. 

Book I. begins by showing that the greatest improvement in the 
productive powers of industry is due to division of labour. From 
division of labour it proceeds to money, because money is necessary 
in order to facilitate division of labour, which depends upon ex- 
change. This naturally leads to a discussion of the terms on which 
exchanges are effected, or value and price. Consideration of price 
reveals the fact that it is divided between wages, profit and rent, 
and is therefore dependent on the rates of wages, profit and rent, 
so that it is necessary to discuss in four chapters variations in these 

Book II. treats first of the nature and.divisions of stock, second- 
ly of a particularly important portion of it, namely money, and the 
means by which that part may be economised by the operations 
of banking, and thirdly the accumulation of capital, which is con- 
nected with the employment of productive labour. Fourthly it con- 
siders the rise and fall of the rate of interest, and fifthly and lastly 
the comparative advantage of different methods of employing 

Book III. shows that the natural progress of opulence is to direct 
capital, first to agriculture, then to manufactures, and lastly to 
foreign commerce, but that this order has been inverted by the, 
policy of modern European states. 

Book IV. deals with two different systems of political economy: 
(i) the system of commerce, and (2) the system of agriculture, 
but the space given to the former, even in the first edition, is eight 
times as great as that given to the latter. The first chapter shows 
the absurdity of the principle of the commercial or mercantile sys- 
tem, that wealth is dependent on the balance of trade; the next 
five discuss in detail and show the futility of the various mean and 
malignant expedients by which the mercantilists endeavoured to 
secure their absurd object, namely, general protectionist duties, 
prohibitions and heavy duties directed against the importation of 
goods from particular countries with which the balance is supposed 
to be disadvantageous, drawbacks, bounties, and treaties of com- 
mence. The seventh chapter, which is a long one, deals with colo- 
nies. According to the forecast at the end of chapter i. liis subject 

® Ibid., p. 263. 


editor’s introduction 

comes here because colonies were established in order to encourage 
exportation by means of peculiar privileges ’and monopolies. But* 
in the chapter itself there is no sign of this. The history and prog- 
ress of colonics is discussed for its own sake, and it is not alleged 
that important colonies have been founded with the object stig- 
gestcd in chapter i. 

In the last chapter of the Book, the physiocratic system is de- 
scribed, and judgement is pronounced against it as well as ‘the com- 
mercial system. The proper system is that of natural liberty, which 
discharges the sovereign from “the duty of superintending the in- 
dustry of private people and of directing it towards the employ- 
ments most suitable to the interest of the society.” 

Book V. deals with the expenses of the sovereign in performing 
the duties left to him, the revenues necessary to meet those ex- 
penses and the results of expenses exceeding Revenue. The discus- 
sion of expenses of defence includes discussion of different kinds of 
military organisation, coUVts of law, means of maintaining public 
works, education, and ecclesiastical establishments. 

Putting these two sketches together we can easily see how closely 
related the book is to the lectures. 

The title “Police” being dropped as not sufficiently indicating 
the subject, there is no necessity for the mention of cleanliness, and 
the remarks on security are removed to the chapter on the accumu- 
lation of capital. The two sections on the natural wants of mankind 
are omitted,®^ illustrating once more the difficulty which econo- 
mists have generally felt about consumption. The next four sec- 
■tions, on division of labour, develop into the first three chapters of 
Book I. of the Wealth of Nations. At this point in the lectures there 
is an abrupt transition to prices, followed by money, the history of 
commerce and the effects of a commercial spirit, but in the Wealth 
of Nations this is avoided by taking money next, as the machinery 
by the aid of which labour is divided, and then proceeding by a 
very natural Transition to prices. In the lectures the discussion of 
money led to a consideration of the notion that wealth consisted in 
money and of all the pernicious consequences of that delusion in 
restricting banking and foreign trade. This was evidently over- 
loading the theory of money, and consequently banking is post- 
poned to the Book about capital, on the ground that it dispenses 
with monjy, which is a dead stock, and thus economises capital, 
while the commercial policy is relegated by itself to Book IV. In 
the lectures, again, wages are only dealt with slightly under prices, 
and profits and rent'not at all; in the Wealth of Nations wages, 

” There is a reminiscence of them in the chapter on Rent, pp. 163-a. 


profits and rent are dealt with at length as compopent parts of 
•price, and the whole broduce of the country is said to be distrib- 
uted into them as three shares. 

The next part of the lectures, that dealing with the causes of 
the slow progress of opulence, forms the foundation for Book III. 
of the Wealth of Nations. The influence of commerce on manners 
disappears as an independent heading, but most of the matter 
dealt with under it is utilised in the discussions of education and 
military organisation. 

Besides consumption, two other subjects, stock-jobbing and 
the Mississippi scheme, which are treated at some length in the 
lectures, are altogether omitted in the Wealth of Nations. The 
description of stodc- jobbing was probably left out because better 
suited to the youthful hearers of the lectures than to the maturer 
readers of the book.. The Mississippi scheme was omitted, Smith 
himself says, because it had been adequately discussed by Du 

Here and there discrepancies may be found between the opin- 
ions expressed in the lectures and those expressed in the book. The 
reasonable and straightforward view of the effects of the corn 
bounty is replaced by a more recondite though less satisfactory 
doctrine. The remark as to the inconvenience of regulations on 
foreign commerce having been alleviated by the fact that they en- 
courage trade with countries from which imported raw materials 
came and discourage it with those from which manufactured goods 
came does not reappear in the book. The passage in the Lectures 
is probably much condensed, and perhaps misrepresents what 
Adam Smith said. If it does not, it shows him to have been not en- 
tirely free from protectionist fallacies at the time the lectures w’ere 

There are some very obvious additions, the most prominent be- 
ing the account of the French physiocratic or agricultural system 
which occupies the last chapter of Book IV. The article on the re- 
lations of church and state (Bk. V., ch. i., pt. iii., art. 3) also ap- 
pears lo be a clear addition, at any rate in so far as the lectures on 
police and revenue are concerned, but, as we shall see presently, 
tradition seems to say that Smith did deal with ecclesiastical estab- 
lishments in this department ot his lectures on jurisprudence, so 
that possibly the lecture notes are deficient at this partici^lar point, 
or the subject was omitted for the particular year in which the 
notes were taken. Then there is the long chapter on colonies. The 

- “ See abpve, p. laxv. 

See below, pp. liv. Iv, for a conjecture on this subject. 

> editor’s introduction 

fact of colon^s having attracted Adam Smith’s attention during 
the interval between the lectures and the pifblication of his book * 
is not very surprising when we remember tha! the interval coincid- 
ed almost exactly with the period from the beginning of the at- 
tempt to tax the colonies to the Declaration of Independence. ' 

But these additions are of small importance compared with the 
introduction of the theory of stock or capital and unproductive 
labour in Book IT., the slipping of a theory of distribution into the 
theory of prices towards the end of Book I., chapter vi., and the 
emphasising of the conception of annual produce. These changes 
do not make so much real difference to Smith’s own work as might 
be supposed; the theory of distribution, though it appears in the 
title of Book I., is no essential part of the work and could easily 
be excised by deleting a few paragraphs in Book I., chapter vi., and 
a few lines elsewhere; if Book II. were al1;pgether omitted the 
other Books could stand perfectly well by themselves. But to sub- 
sequent economics they ^ere of fundamental importance. They 
settled the form of economic treatises for a century at least. 

They were of course due to the acquaintance with the French 
Economistes which Adam Smith made during his visit to France 
with the Duke of Buccleugh in 1764-6. It has been said that he 
might have been acquainted with many works of this school before 
the notes of his lectures were taken, and so he might. But the notes 
of his lectures are good evidence to show that as a matter of fact he 
was not, or at any rate that he had not assimilated their main 
economic theories. When we find that there is no trace of these 
theories in the Lectures and a great deal in the Wealth of Nations, 
and that in the meantime Adam Smith had been to France and 
mixed with all the prominent members of the “sect,” including their 
master, Quesnay, it is difficult to understand why we should be 
asked, without any evidence, to refrain from believing that he 
came under physiocratic influence after and not before or during 
his Glasgow jJeriod, 

The confession of faith of the Economistes is embodied in Ques- 
nay’s Tableau Economique, which one of them described as 
worthy of being ranked, along with writing and money, as one of 
the three greatest inventions of the human race.*® It is reprinted 
below from the facsimile of the edition of 1759, published by the 
British Egonomic Association (now the Royal Economic Society) 
in 1894. 

Those who are curious as to the exact meaning of the zigzag lines 
may study Quesna/s Explication, which the British Economic 

“ Below, p. 643, note ig. 

** editor’s introduction 


Objtts d considSrer, 1“. Trois sorles dc depenscs, 2°. Icur source; 3°. leurs 
avarices; 4°. hur dislrilfuliou; 5°. leiirs effcls, 6°. Icur reproduction; 7°. 
leurs rappdrts cntr'elles, 8“. kitrs rapports avcc la population; g°. avec 
rAgrictdture; 10°. avec I'industrie; 11°. avec le commerce; 13“. avec la 
masse des richesses d'uiic Nation. 

PRODVCTIVES I'Impdt prelrve, se parlagH STpRILES 
reletives i aux Depenses produclives el rehlives li 

I’Agrkuiiure, &*f. aux D/pe»ses skriUs. 

I'industrie, &'c. 

Avances annueUcs 


Avarices annuclles 

pour proiuire un revenu dc 


pour les Ouvrages des 

600U sont todl 


Depenses stcrilcs, sont 

COO^^ produkeui net 



PruJmh'MS^^^ ' 

. Oili ragu, 

SWllt^/fprodHisent /irt.j, ......... 




--ft-!"** uy 

tSCC^jir^uuent net ISO *"”"*150 

a^ilie, ijv. 

3? . net 

■,v.v:s7 . 10 

•••G^,,fcprddHisenf iid... 



"■.i. 13 . ..9 

S...6. IfLjxpjndtiisetil net 






0. 1 1 . . . ^.'ffjyiyHnhctU net 

0.,..7. ] jnvduisctil net 



d...2. 1 Cnr/mK^fMcn/ nd... , 

1 1 

'fFprdduwfit net... . 


REPRODUIT TOTAL OooW. de revenu; de plus, les frais anntids 

ds 6^11 et les interets des avarices primitives du Laboureur, de sodl'que la terre 
restUije. Ainsi la reproduction est de isooU compris le rcverm de 600II. qui est la 
base du calcul, abstraction faite de Vimpdt prtdevi, etudes avarices qidexi-ge sa 
reproductiori annttdU, Prc. Voyez P Explication d la page. siHvante. ' 

• editor’s introduction *1' 

Association published along with the table in 1894. For our pres- 
ent purposes i? is sufficient to see (i) that it involves a conception . 
of the whole annual produce or reproductio’^ of a country; ( 5 ) 
that it teaches that some labour is unproductive, that to .maintain 
the annual produce certain “avances” are necessary, and that this 
annual produce is “distributed.” Adam Smith, as his chapter on 
agricultural s3'stems shows, did not appreciate the minuti® of the 
table very highly, but he certainly took these main ideas and 
adapted them as well as he could to his Glasgow theories. With 
those theories the conception of an annual produce was in no way 
inconsistent, and he had no difficulty in adopting annual produce 
as the wealth of a nation, though he very often forgetfully falls 
back into older ways of speaking. As to unproductive labour, he 
was not prepared to condemn the whole of Glasgow industry as 
sterile, but was ready to place the medisval retainer and even the 
modern menial servant in the unproductive cfass. He would even 
go a little farther and pui along with them all whose labour did 
not produce particular vendible objects, or who were not employed 
for the money-gain of their employers. Becoming somewhat con- 
fused among these distinctions and the physiocratic doctrine of 
“ai'ances,” he imagined a close connexion between the employ- 
ment of productive labour and the accumulation and employment 
of capital. Hence with the aid of the common observation that 
where a capitalist appears, labourers soon spring up, he arrived at 
the view that the amount of capital in a country determines the 
number of “useful and productive” labourers. Finally he slipped 
into his theory of prices and their component parts the suggestion 
that as the price of any one commodity is divided between wages, 
profits and rent, so the whole produce is divided between labourers, 
capitalists, and landlords. 

These ideas about capital and unproductive labour are certain- 
ly of great importance in the history of economic theory, but they 
were fundamantally unsound, and were never so universally ac- 
cepted as is commonly supposed. The conception of the wealth of 
nations as an annual produce, annually distributed, however, has 
been of immense value. Like other conceptions of the kind it was 
certain to cbme. It might have been evolved direct from Davenant 
or Petty nearly a century before. We need not suppose that some 
ond else would not soon have given it its place in English econom- 
ics if Adam Smith had not done so, but that need not deter us from 
recording the fact that it was he who introduced it, and that he, in- 
troduced il in conseqaence of his association with the Economistes, 

If we attempt to darry the history of the origin of the Wealth 0 } 

*1 “ editor’s introduction • 

Nations farther back than the date of the lecture notes in 1763 or 
thereabouts, we can ptDl find a small amount of autHentic informa- 
tion. We know thatj Smith must have been using practically the 
same divisions in his lectures in 1759, since he promises in the last 
paragraph of the Moral Sentiments published in that year, “an- 
other discourse” in which he would “endeavour to give an account 
of the general principles of law and government, and of the differ- 
ent revolutions they have undergone in the different ages and 
periods of society, not only in what concerns justice, but in what 
concerns police, revenue and arms, and whatever else is the object 
of law.” It seems probable, however, that the economic portion of 
the lectures was not always headed “police, revenue, and arms,” 
since Millar, who attended the lectures when they were first de- 
livered in 1751-2, says: — 

“In the last part of his lectures he examined those political regula- 
tions which are founded not upon the principle of justice, but that of 
expediency, and which are calculated to idcrease the riches, the power 
and the prosperity of a state. Under this view, he considered the po- 
litical institutions relating to commerce, to finances, to ecclesiastical 
and military establishments. What he delivered on these subjects con- 
tained the substance of the work he afterwards published under the 
title of ‘An Inquiry into the Nature and Causes of the Wealth of Na- 

Of course this is not necessarily inconsistent with the economic 
lectures having been denominated police, revenue, and arms, even 
at that early date, but the italicising of “justice” and “expediency,” 
if due to Millar, rather suggests the contrary, and there is no deny- 
ing that the arrangement of “cheapness or plenty” under “police” 
may very well have been an afterthought fallen upon to justify the 
introduction of a mass of economic material into lectures on Juris- 
prudence. As to the reason why that introduction took place the 
circumstances of Smith’s first active session at Glasgow suggest 
another motive besides his love for the subject, which, we may 
notice, did not prevent him from publishing his views on Ethics 

His first appointment at Glasgow, it must be remembered, was 
to the Professorship of Logic in January, 1751, but his engage- 
ments at Edinburgh prevented his performing the duties that ses- 
sion. Before the beginning of next session he was asked to act as 

“Dugald Stewart, in his “Account of the Life and Writings of Adam 
Smifn,” read to the Royal Society of Edinburgh in 1793 and published in 
Adam Smith’s posthumous Essays on Philosophical' Subjects, i7!)S, p. xviii. 
See Rae, lAje of Adam Smith, pp. 53-5. 

• editor’s introduction 

deputy for Craigie, the Professor of Moral Philosophy, who was 
going away fSr the benefit of his health. He consented, and conse- . 
quently in the session of 1 751-2 he had to tjegin the work of two 
professorships, as to one of which he had very little previous warn- 
ing.®" Every teacher in such a position would do his-'best- to 
utilise any suitable material which he happened to have by him, 
and most men would even stretch a point to utilise even what was 
not perfectly suitable. 

Now we know that Adam Smith possessed in manuscript in the 
hand of a clerk employed by him certain lectures which he read at 
Edinburgh in the winter of 17 50-1, and we know that in these lec- 
tures he preached the doctrine of the beneficial effects of freedom, 
and, according to Dugald Stewart, "many of the most important 
opinions in the Wealth oj Nations.” There existed when Stewart 
wrote, “a short manuscript drawn up by Mr. Smith in the year 
1755 and presented by him to a society of which he was then a 
member.’' Stewart says of,this paper: — 

'•Jlany of the most important opinions in The Wealth of Nations 
aie there detailed; but I shall quote only the following sentences: 
‘Man is generally considered by statesmen and projectors as the ma- 
terials of a sort of political mechanics. Projectors disturb nature in 
the course of her operations in human affairs; and it requires no more 
than to let her alone, and give her fair play in the pursuit of her ends 
that she may establish her own designs.’ And in another passage: ‘Lit- 
tle else is requisite to carry a state to the highest degree of opulence 
from the lowest barbarism, but peace, easy taxes, and a tolerable ad- 
ministration of justice; all the rest being brought about by the natural 
course of things. All governments which thwart this natural course, 
which force things into another channel or which endeavour to arrest 
the progress of society at a particular point, are unnatural, and to 
support themselves are obliged to be oppressive and tyrannical . — h 
great part of the opinions,’ he observes, ‘enumerated in this paper is 
treated of at length in some lectures which I have still by me, and 
which were written in the hand of a, clerk who left my service six years 
ago. They have all of them been the constant subjects of my lectures 
since I first taught Mr. Craigie’s class, the first winter I spent in Glas- 
gow, down to this day, without any considerable variation. They had 
all of them been the subjects of lectures which I read at Edinburgh 
the winter before I left it, and I can adduce innumerable witnesses 
both from^that place and from this, who will ascertain them suffici- 
ently to be mine.’ ” 

"Rae, Life of Adam Smith, pp. 42-5. 

Stewart,«in Smith’# Essays, pp. l.vxx, Ixxxi. 

*iiv editor’s introduction , 

It seems then that, when confronted with the two professorial 
. chairs in 1751, Smith had by him some lectures on t)rogress, very 
liktly explaining “tlje slow progress of opulence,” and that, as 
anyone in such circumstances would have liked to do, he put them 
into his moral philosophy course. 

As it happened, there was no difficulty in doing this. It seems 
nearly certain that Craigie himself suggested that it should be 
done. The request that Smith would take Craigie’s work came 
through Cullen, and in answering Cullen’s letter, which has not 
been preserved. Smith says, “You mention natural jurisprudence 
and politics as the parts of his lectures which it w'ould be most 
agreeable for me to teach. I shall very willingly undertake both." 
Craigie doubtless knew what Smith had been lecturing upon in 
Edinburgh in the previous winter and called it “politics.” 

Moreover the traditions of the Chair of iMoral Philosophy, as 
known to Adam Smith, required a certain amount of economics. 
A dozen years earlier he had himself been a student when Franc's 
Hutcheson was professor. So far as we can judge from Hutcheson's 
Systcfti oj Moral Philosophy, which, as Dr. W. R. Scott ha-« 
shown.'^® was already in existence when Smith was a student, 
though not published till 1755, Hutcheson lectured first on Ethics, 
next upon what might very well be called Natural Jurisprudence, 
and thirdly upon Civil Polity. Through the two latter parts a con- 
siderable quantity of economic doctrine is scattered. 

In considering “The Necessity of a Social Life,'’ Hutcheson 
points out that a man in solitude, however strong and instructed in 
the arts, “could scarce procure to himself the bare necessaries of 
life even in the best soils or climates.” 

“Nay ‘lis well known that the produce of the labours of any given 
number, twenty for instance, in providing the necessaries or conven- 
iences of life, shall be much greater by assigning to one a certain sort 
of work 'of one kind in wlrch he will soon acquire skill and dexterity, 
and to another assigning work of a different kind, than'-if each one of 
the twenty were obliged to employ himself by turns in all the differ- 
ent sorts of labour requisite for his subsistence without sufficient dex- 
terity in any. In the former method each procures a great quantity of 
goods of one kind, and can exchange a part of it for such goods ob- 
tained by the labours of others as he shall stand in need of. One grows 
expert .in tillage, another in pasture and breeding cattle, a third in ma- 

, ”Rac, Lije of Adam Smith, pp. 43-4. 

'".W. R. Scott, Francis Hutcheson, 1900, pp. 210, 231. In the Introduc- 
tion to Moral Philosophy, 1747, Civil Polity is replaced by “CEconomicks 
and Politicks,” but “CEconomicks” only means doriicstic law, i.e,, the rights 

f husb!<nrls .nnd wives, parents and children, masters and scrvrnts. 

> editor’s introduction 

sonry, a fourth in the chase, a fifth in iron-works, a sixth in the arts 
of the loom, alid so on throughout the rest. Thus all are supplied by ^ 
means of barter with the works of complete artists. In .the other meth- 
od scarce any one could be dexterous and skilful in any one sort of 

‘‘Again, some works of the highest use to multitudes can be' effec- 
tually executed by the joint labours of many, whiph the separate la- 
bours of the same number could never have execute^. The joint force 
of many can repel dangers arising from savage beasts or bands of rob- 
bers which might have been fatal to many individuals were they sep- 
arately to encounter them. The joint labours of twenty men will cul- 
tivate forests or drain marshes, for farms to each one, and provide 
houses for habitation and inclosures for their flocks, much sooner than 
the separate labours of the same number. By concert and alternate re- 
lief they can keep a perpetual watch, which v-^ithout concert they could 
not accomplish.”” 

In explaining the “Foundation of Property” Hutcheson says 
that when population waa scanty, the country fertile and the cli- 
mate mild, there was not much need for developing the rules of 
property, but as things are, “universal industry is plainly neces- 
sary for the support of mankind” and men must be excited to 
labour by self-interest and family affection. If the fruits of men’s 
labours are not secured to them, “one has no other motive to la- 
bour than the general affection to his kind, which is commonly 
much weaker than the narrower affections to our friends and re- 
lations, not to mention the opposition which in this case would be 
given by most of the selfish ones.” Willing industry could not be 
secured in a communistic society.'*® 

The largest continuous block of economic doctrine in the Sys^ 
tern of Moral Philosophy is to be found in the chapter on “The 
Values of Goods in Commerce and the Nature of Coin” which 
occurs in the middle of the discussion of contracts. In this chapter 
it is pointed out that it is necessary for commerce that goods 
should be valued. The values of goods depend on the demand for 
them and the difficulty of acquiring them. Values must be meas- 
ured by some common standard, and this standard must be some- 
thing generally desired, so that men may be generally willing tc 
take it in exchange. To secure this it should be something portable, 
divisible without loss, and durable. Gold and silver best fulfil these 
requirements. At first they were used by quantity or weight, with- 
out coinage, but eventually the state vouched for quantity and 
quality by its stamp. The stamp being “easy workmanship” ^ddil 

” Systems of Moral ptilosophy, vol. i., pp. 288, 289. 

Systein*of Moral Philosophy, vol. i., pp. 319-21. 

rivi editor’s introduction * 

no considerable value. “Coin is ever valued as a commodity in 
, commerce as well as other goods; and that in projjortion to the 
rarity of the metal, ^r the demand is universal.” The only way to 
raise its value artificially would be by restricting the produce of 
the mines. 

“We say indeed commonly, that the rates of labour and goods have 
risen since these metals grew plenty; and that the rates of labour and 
goods were low when the metals were scarce; conceiving the value of 
the metals as invariable, because the legal names of the pieces, the 
pounds, shillings or pence, continue to them always the same till a law 
alters them. But a day’s digging or ploughing was as uneasy to a man 
a thousand years ago as it is now, though he could not then get so 
much silver for it: and a barrel of wheat, or beef, was then of the 
same use to support the human body, as it is now when it is exchanged 
for four times as much silver. Properly, the value of labour, grain, 
and cattle are always pretty much the same, as they afford the same 
uses in life, where no new inventions of tillage or pasturage cause a 
greater quantity in proportion to the demand.” ” 

Lowering and raising the coins are unjust and pernicious opera- 
tions. Copious mines abate the value of the precious metals. 

“The standard itself is varying insensibly; and therefore if we would 
settle fixed salaries which in all events would answer the same pur- 
poses of life, or support those entituled to them in the same condition 
with respect to others, they should neither be fixed in the legal names 
of coin, nor in a certain number of ounces of gold and silver. A decree 
of state may change the legal names; and the value of the ounces may 
alter by the increase or decrease of the quantities of these metals. Nor 
should such salaries be fixed in any quantities of more ingenious man- 
ufactures, for nice contrivances to facilitate labour may lower the 
value of such goods. The most invariable salary would be so many 
days labour of men, or a fixed quantity of goods produced by the 
plain inartificial labours, such goods as answer the ordinary purposes 
of life. Quantities of grain come nearest to such a standard.” '* 

Prices of goods depend upon the expenses, the interest of money 
employed, and the “labours too, the care, attention, accounts and 
correspondence about them.” Sometimes we must “take in also the 
condition of the person so employed,” since “the expense of his 
station of life must be defrayed by the price of such labours; and 
they dpserve compensation as much as any other. This additional 
price of their labours is the just foundation of the ordkary profit 
of merchants.” 

’’’System of Moral Philosophy, vol. ii., p. s8. 
vol. u., pp. 62, 63. 


I editor’s introduction 

In the next chapter, on “The Principal Contracts in a Social 
Life,” we findT the rent or hire of unfruitful ^ods, such as houses, 
justified on the ground that the proprietor raight have employed 
his money or labour on goods naturally fruitful. 

“If in any way of trade men can make far greater gains by help of 
a large stock of money than they could have made without it, ’tis but 
just that he who supplies them with the money, the necessary means 
of this gain, should have for the use of it some share of the profit, 
equal at least to the profit he could have made by purchasing things 
naturally fruitful or yielding a rent. This shows the just foundation 
of interest upon money lent, though it be not naturally fruitful. Hous- 
es yield no fruits or increase, nor will some arable grounds yield any 
without great labour. Labour employed in managing money in trade 
or manufactures will make it as fruitful as anything. Were interest 
prohibited, none would lend except in charity; and many industrious 
hands who are not objects of charity would be excluded from large 
gains in a way very advantageous to the public.” ” 

Reasonable interest varies with the state of trade and the quan- 
tity of coin. In a newly settled country great profits are made by 
small sums, and land is worth fewer years’ purchase, so that a 
higher interest is reasonable. Laws in settling interest must fol- 
low “these natural causes,” otherwise they will be evaded.'’* 

In the chapter “Of the Nature of Civil Laws and their Execu- 
tion,” we find that after piety the virtues most necessary to a state 
are sobriety, industry, justice and fortitude. 

“Industry is the natural mine of wealth, the fund of all stores for 
exportation by the surplus of which beyond the value of what a nation 
imports, it must increase in wealth and power. Diligent agriculture 
must furnish the necessaries of life and the materials for aU manu- 
factures; and all mechanic arts sliould be encouraged to prepare them 
for use and exportation. Goods prepared for export should generally 
be free from all burdens and taxes, and so should the goods be which 
are necessarily consumed by the artificers, as much as possible; that 
no other country be able to undersell like goods at a foreign market. 
Where one country alone has certain materials, they may safely im- 
pose duties upon them when exported; but such moderate ones a? 
shall not prevent the consumption of them abroad. 

“If people have not acquired an habit of industry, the cheapness of 
all the necessaries of life rather encourages sloth. The best remedy is 
to raise thd demand for all necessaries; not merely by premiums upon 
exporting them, which is often useful too; but by increasing the num- 

" System •of Moral Philosophy, pp. 71-a. 

"Ibid., vol. ii., p. if. 

riviii editor’s INTRODUCTION 

ber of people who consume them; and when they are dear, more la- 
, hour and application will be requisite in all trades and‘arts to procure 
them. Industrious foreigners should therefore be invited to us, and all 
men of industry should live with us unmolested and easy. Encourage- 
ment should be given to marriage and to those who rear a numerous 
offspring to industry. Thff unmarried should pay higher taxes as they 
are not at the charge of'rearing new subjects to the state. Any foolish 
notions of in mechanic arts, as if they were unworthy of 
men of better families, should be borne down, and men of better con- 
dition as to birth or fortune engaged to be concerned in such occupa- 
tions. Sloth should be punished by temporary servitude at least. For- 
eign materials should be imported and even premiums gi'mn, when 
necessary, that all our own hands may be employed; and that, by ex- 
porting them again manufactured, we may obtain from abroad the 
price of our labours. Foreign manufactures and products ready for 
consumption should be made dear to the consumer by high duties, if 
we cannot altogethes prohibit the consumption; that they may never 
be used by the lower and more numerous orders of the people whose 
consumption would be far greater than' those of the few who arc 
wealthy. Navigation, or the carriage of goods foreign or domestic, 
should be encouraged, as a gainful branch of business surpassing often 
all the profit made by the merchant. This too is a nursery of fit hands 
for defence at sea. 

“ 'Tis vain to allege that luxury and intemperance are necessary to 
the wealth of a state as they encourage all labour and manufactures 
by making a groat consumption. It is plain there is no necessary’ vice 
in the consuming of the finest products or the wearing of the dearest 
manufactures by persons whose fortunes can allow it consistently with 
the duties of life. And what if men grew’ generally more frugal and 
abstemious in such things? more of these finer goods could be sent 
abroad; or if they could not, industry and wealth might be equally 
promoted by the greater consumption of goods less chargeable; as he 
who saves by abating of his own e.xpcnsive splendour could by gener- 
ous offices to his friends, and by some wise methods of charity’ to the 
poor, enable otllfers to live so much better and make greater consump- 
tion than was made formerly by the luxury of one. . Unless there- 
fore a nation can be found where all men are already provided with 
all the necessaries and convenicncies of life abundantly, men may, 
without any luxury, make the very greatest consumption by plentiful 
provision for their children, by generosity and liberality to kinsmen 
and indigent men of worth, and by compassion to the distresses of the 
poor.” " 


Under “Military skill and fortitude” Hutcheson discusses what 
Adam ^Smith afterwards placed under “Arms,” and decides in 
favdut^f'a trained militia.^® 


System of Moral Philosophy, vol. ii., pp. 318-2*^. 

Ibid., vol. ii., pp. 323-5. 

editor’s introduction **>* 

In the same chapter he has a section with the marginal title 
“what taxes or tributes most eligible,” which contains a repudia- . 
tion of the policy of taxation for revenue only; — 

“As to taxes for defraying the public expenses, these are most con- 
venient which are laid on matters of luxurytand splendour rather than 
the necessaries of life; on foreign products "and mamifactures rather 
than domestic; and such as can be easily raised without many expen- 
sive offices for collecting them. But above all, a just proportibn to the 
wealth of people should be observed in whatever is raised from them, 
otherway s than by duties upon foreign products and manufactures, 
for such duties are often necessary to encourage industry at home, 
though there were no public expenses.’’” 

L This proportionment of taxation to wealth he thinks cannot be 
attained except by means of periodical estimation of the wealth of 
families, since land taxes unduly oppress landlords in debt and let 
moneyed men go free, while duties and excises are paid by the 
consumer, so that “hospitable generous men or such as have nu- 
merous families supported genteelly bear the chief burden here, 
and the solitary sordid miser bears little or no share of it.” 

, It is quite clear from all this that Smith was largely Influenced 
"by the traditions of his chair in selecting his economic subjects. 
Dr. Scott draws attention to the curious fact that the very order in 
which the subjects happen to occur in Hutcheson’s System is al- 
most identical with the order in which the same subjects occur in 
Smith’s Lectures.'''- We are strongly tempted to surmise that when 
Smith had hurriedly to prepare his lectures for Craigie’s class, he 
looked through his notes of his old master’s lectures (as hundreds 
of men in his position have done before and after him) and grouped 
the economic subjects together as an introduction and sequel to the 
lectures which he had brought with him from Edinburgh. Hutche- 
son was an inspiring teacher. His colleague, Leednaan, says; — 

“As he had Pcc-ision every year in the course of his lectures to ex- 
plain the origin of government and compare the different forms of it. 
he took peculiar care, while on that subject, to inculcate the impor- 
tance of civil and religious liberty to the happiness of mankind: as a 
warm love of liberty and manly zeal for promoting it were ruling 
principles in his own breast, he always insisted upon it at great length 
and with the greatest strength of argument and earnestness of persua- 
sion: and he had such success on this important point, that few. if 
any, of his pupils, whatever contrary prejudices they might bring 

™ Ibid., pp. 340-1. < 

^System of Moral Bhilosophy, vol. ii., pp. 341-2. 

''■Francis Hutcheson, pp. 232-5. 

Ieditor’s introduction 

along with them, ever left him without favourable notions of that side 
»of the question which Me espoused and defended.” ” 

Half a century later Adam Smith spoke of the Glasgow Chair of 
Moral Philosophy as an “office to which the abilities and virtues 
of the never-to-be-forgott|fc Dr. Hutcheson had given a superior 
degree of illustraSkn.” 

But while we may well believe that Adam Smith was influenced 
in the general direction of liberalism by Hutcheson, there seems 
no reason for attributing to Hutcheson’s influence the belief in the 
economic beneficence of self-interest which permeates the Wealth 
of Nations and has afforded a starting ground for economic specu- 
lation ever since. HutchesonT^TUiiie uf Llie passages just quoted 
show, was a mercantilist, and all the economic teaching in his Sys- 
tem is very dry bones compared to Smith’s vigorous lectures on 
Cheapness or Plenty, wdth their often repealed denunciation of 
the “absurdity” of current opinions and the “pernicious regula- 
tions” to which they gave rise. Twenty years after attending his 
lectures, Adam Smith criticised Hutcheson expressly on the ground 
that he thought too little of self-love. In the chapter of the Theory 
of Moral Sentiments on the systems of philosophy which make vir- 
tue consist in benevolence, he says that Hutcheson believed that it 
was benevolence only which could stamp upon any action the 
character of virtue; the most benevolent action was that which 
aimed at the good of the largest number of people, and self-love 
was a principle which could never be virtuous, though it was inno- 
cent when it had no other effect than to make the individual talce 
care of his own happiness. This “amiable system, a system which 
has a peculiar tendency to nourish and support in the human heart 
the noblest and the most agreeable of all affections,” Smith consid- 
ered to have the “defect of not sufficiently explaining from whence 
arises our approbation of the inferior virtues of prudence, vigi- 
lance, circumspection, temperance, constancy, firmness.” 

“Regard,” he continues, “to our own private happiness and interest 
coo, appear upon many occasions very laudable principles of action. 
The habi^ of (economy, industry, discretion, attention and application 
of thought, are generally supposed to be cultivated from self-inter- 
ested motives, and at the same time are apprehended to be very 
praise-worthy qualities which deserve the esteem and approbation of 
every body. . . . Carelessness and want of oeconomy are “universally 

"fc the pieface to Hutcheson’s System of Moral Philosophy, pp. xxxv, 
zxxvi. ■■ 

“ Rae, life of Adam Smith, p. 411. 

editok’s introduction 

disapproved of, not, however, as proceeding from a want of benevo- 
lence, but from a want of the proper attention* to the objects of self-* 
interest.” “ 

Adam Smith clearly believed that Hutcheson’s system did not 
give a sufficiently high place to self-intatest., It was not Hutcheson 
that inspired his remark, “it is not from the lisnevolence of the 
butcher, the brewer- or the baker that we expect our dinner, but 
from their regard to their own interest.” He may have obtained 
a general love of liberty from Hutcheson, but whence did he ob- 
tain the belief that self-interest works for the benefit of the whole 
economic community? He might possibly of course have evolved 
it entirely in his own mind without even hearing another lecture or 
reading another book after he left Hutcheson’s class. But it seems 
probable — ^we cannot safely say more — that he was assisted by 
his study of Mandeville, a writer who has hSid little justice done 
him in histories of economics, though McCulloch gives a useful 
hint on the subject in his Literature of Political Economy. In the 
chapter of the Moral Sentiments which follows the one which con- 
tains the criticism of Hutcheson just quoted. Smith deals with 
“Licentious Systems.” The appearances in human nature, he says, 
which seem at first sight to favour such systems were “slightly 
sketched out with the elegance and delicate precision of the duke 
of Rochefaucault, and afterwards more fully represented with the 
lively and humorous, though coarse and rustic eloquence of Dr. 

Mandeville, he says, attributes all commendable acts to “a love 
of praise and commendation,” or “vanity,” and not content with 
that, endeavours to point out the imperfection of human virtue in 
many other respects. 

“Wherever our reserve with regard to pleasure --falls short of the 
most ascetic abstinence, he treats it as gross luxury and sensuality. 
Evcr>' thing a’ceording to him, is luxury which exceeds what is abso- 
lutely necessary for the support of human nature, so that there is vice 
even in the use of a clean shirt or of a convenient habitation.” " 

But, Smith thinks, he has fallen into the great fallac3^f repre- 
senting every passion as wholly vicious if it is so in any degree and 
direction: — 

** Moral Sentiments, 1739, pp. 464-6. 

“Below, vol. i., p. 

“Moral Scntimcnts,fi 759 , P- 474- 

“Ibid., 1739, p. 483. 

fii editor’s introduction 

“It is thus that he treats everything as vanity which has any refer- 
. ence either to what art or to what ought to be the sentiments of oth- 
er?: and it is by means of this sophistry that he establishes his fav- 
ourite conclusion that private vices are public benefits. If the love of 
magnificence, a taste for the elegant arts and improvements of human 
life, for whatever is agreeable in dress, furniture, or equipage, for 
architecture, statuary, painting and music, is to be regarded as luxury, 
sensuality and ostentation, ifeven in those whose situation allows, with- 
out any mconveniency, the indulgence of those passions, it is certain 
that luxury, sensuality- and ostentation are public benefits; since, with- 
out the qualities upon which he thinks proper to bestow such oppro- 
brious names, the arts of refinement could never find encouragement 
and must languish for want of employment.” “ 

“Such,” Smith concludes, “is the system of Dr. Mandeville, 
which once made so much noise in the world.” However destruc- 
tive it might appear, ‘he thought “it could never have imposed upon 
so great a number of persons, nor have occasioned so general an 
alarm among those who are friends of better principles, had it not 
in some respects bordered upon the truth.” 

Mandeville’s work originally consisted merely of a poem of 400 
lines called “The Grumbling Hive; or Knaves Turn’d Honest,” 
which according to his own account was first published as a six- 
penny pamphlet about 1705.®® In 1714 he reprinted it, appending 
a very much larger quantity of prose, under the title of The Fable 
of the Bees: or Private Vices, Public Benefits; with an Essay on 
Charity and Charity Schools and a Search into the Nature of Soci- 
ety. In 1729 he added further a second part, nearly as large as the 
first, consisting of a dialogue on the subject. The “grumbling hive,” 
which is in reality a human society, is described in the poem as 
prospering greatly so long as it was full of vice: — 

“The worst of all the multitude 
Did something for the common good. 

This was the state’s craft, that maintain’d 
The wh^e, of which each part complain’d: 

This, asuit musick harmony. 

Made jirrings in the main agree ; 

Parties directly opposite, 

AssiA each oth’r, as 'twere for spight ; 

And temp’rance with sobriety 
Serve drunkenness and gluttony. 

The root of evil, avarice, 

That damn’d ill-natur’d baneful vice, 

Was slave to prodigality, 

"Ibid., p. 4py. 

Moral StMmenls, 1759, p. 487. 

"Fable o) the Bees, 1714, preface. 

editor’s introduction ““ 

That noble dn ; whilst luxury 
Employ’d a million of the poor, • 

And odious pride a million more; 

Envy itself and vanity 
Were ministers of industry ; 

Their darling folly, fickleness 
In diet, furniture, and dress. 

That strange ridiclous vice, was made > 

The very wheel that turn’d t{ie trade. 

Their laws and cloaths were equally 
Objects of mutability; 

For what was well done for a time. 

In half a year became a crime ; 

Yet whilst they altered thus their laws. 

Still finding and correcting flaws, 

They mended hy inconstancy 
Faults which no prudence could foresee. 

Thus vice nursed ingenuity. 

Which join’d with time and industry. 

Had carry’d life’s conveniencies. 

It’s real pleasures, comforts, ease, * 

To such a height, the very poor 
Lived bettef than the rich before ; 

And nothing could be added more.” " 

But the bees grumbled till Jove in anger swore he would rid the 
hive of fraud. The hive became virtuous, frugal and honest, and 
trade was forthwith ruined by the cessation of expenditure. At the 
end of the “Search into the Nature of Society” the author sums up 
his conclusion as follows: 

“After this I flatter myself to have demonstrated that neither the 
friendly qualities and kind affections that are natural to man, nor the 
real virtues he is capable of acquiring by reason and self-denial, are 
the foundation of society: but that what we call evil in the world, 
moral as well as natural, is the grand principle that makes us sociable 
creatures, the solid basis, the life and support of all trades and em- 
ployments without exception: that there we must look for the true 
origin of all arts and sciences, and that the moment evil ceases the 
society must be spoiled, if not totally dissolved,’" 

In a letter to the London Journal of icAh August, 1723, which 
he reprinted in the edition of 1724, RIandeville defended this pas- 
sage vigorously against a hostile critic. If, he said, he had been 
writing to be understood by the meanest capacities, he would have 
explained that every want was an evil: — 

“That oto the multiplicity of those wants depended all those mutual 
services which the individual members of a society pay^o each other: 

“Pp. 11-13 in the e^. of 1705. 

”Pp. 427-8 in 2nd ed., 1723. 

liv editor’s introduction 

and that consequently, the greater variety there was ,of wants, the 
•larger number of individuals might find their private interest in la- 
bodring for the good of others, and united together, compose one 

If we bear in mind criticism of Hutcheson and Mande- 

ville in adjoining chaptlSKthe Moral Sentiments, and remember 
farther that he must almost certainly have become acquainted 
with the Fable of the Bees wheji attending Hutcheson’s lectures or 
soon afterwards, we ^n scarcedy fail to suspect that it was Man- 
deville who first made him realise that “it is not from the benevo- 
lence of the butcher, the brewer or the baker that we expect our 
dinner, but from their regard to their own interest.” Treating the 
word “vice” as a mistake for self-love, Adam Smith could have re- 
peated with cordiality llandeville’s lines already quoted; — 


“Thus vice nursed ingenuity. 

Which join’d with time andtindustry, 

Had cany'd life’s conveniendes. 

It’s real pleasures, comforts, ease. 

To such a height, the very poor 
Lived better than the rich before.” 

Smith put the doggerel into prose, and added something from 
the Hutdiesonian love of liberty when he propounded what is 
really the text of the polemical portion of the Wealth of Na- 
tions : — 

“The natural effort of every individual to better his own condition, 
when suffered to exert itself with freedom and security, is so power- 
ful a principle, that it is alone and without any assistance, not only 
capable of carrying on the society to wealth and prosperity, but of 
surmounting a hundi:ed impertinent obstructions with which the folly 
of human laws too often incumbers its operations.” ” 

* Experience shows that a general belief in the beneficence of the 
economic working of self-interest is not always sufficient to make 
‘ even a person of more than average intelligence a free-trader. Con- 
sequently it would be rash to suppose that Smith’s disbelief in the 
mercantile system was merely the natural outcome of his general 
belief in economic freedom. Dugald Stewart’s quotations from his 
paper of 1755 do not contain anything to show that he was pour- 
ing contempt on the doctrine before he left Edinburgh ^nd in his 
early years at Glasgow. It seems very likely that the reference in 
the lectures to Hume’s “essays showing the absurdity of these and 

"P. 46s in ed. of 1724. 

Bdow, p. soS. 

• editor’s introduction 

other such dpctiines” is to be regarded as an acknowledgment 
of obligation, and therefore that it was Hume, by his Political Dis-' 
courses on Money and the Balance of Trade in 1752, who first 
opened Adam Smith’s eyes on this subject. The probability of this 
is slightly increased by the fact that injghejectures the mercantile 
fallacies as to the balance of trade discussed in connexion 
with Money, as in Hume’s Discourse^nstesid of in the position 
which they would have occupied if Smith had either ' followed 
Hutcheson’s order, or placed themlamong the causes of the “slow 
progress of opulence.” It is, too, perhaps, no't a mere coincidence 
that while both Hume in the Discourses in 1752 and his 
lectures ten years later rejected altogether the aim of securing a 
favourable balance of trade, Hume still clearly believed in the 
utility of protection for home industries, and Smith is at any rate 
repoited to have made a considerable conces^on in its favour.®® 

It would be useless to carry the inquiry into the origin of Adam 
Smith’s views any further here. Perhaps it has been carried too far 
already. In the course of the Wealth oj Nations Smith actually 
quotes by their own name or that of their authors almost one hun- 
dred books. An attentive study of the notes to the present edition 
will convince the reader that though a few of these are quoted at 
second hand the number actually used was far greater. Usually but 
little, sometimes only a single fact, phrase or opinion, is taken from 
each, so that few authors are less open than Adam Smith to the 
reproach of having rifled another man’s work JThat charge has in- 
deed never seriously been brought against him, except in regard to 
Turgot’s Reflexions, and in that case not a particle of evidence has 
ever been produced to show that he had used or even seen the book 
in question (The Wealth of Nations was not written hastily with 
the impressions of recent reading still vivid on the author’s brain. 
Its composition was spread over at least the twenty-seven year|^ 
from 1749 to 1776. During that period economic ideas crossed ana 
recrossed the? Channel many times, ^and it is as useless as it is in- 
vidious to dispute about the relative shares of Great Britain and 
France in the progress effected? To go further and attempt to ap- 
portion the merit between different authors is like standing on 
some beach and discussing whether this or that particular wave 
had most to do with the rising tide. One wave may appear to have 

” Lecturos, p. 197. 

" Above pp. XXXV, xxxviii. Moreover, before bringing out the second edition 
of his Discourses, Hume wrote to Adam Smith a^ung for suggestions. That 
Smith made no remarl^on the protectionist passage in the discourse on the 
Balance of Trade seew to be indicated by the fact that it remained un- 
altered (see* Hume’s Essays, ed. Green & Grose, vol. i., pp. 59, 343 344). 

• Ivi editor’s introduction 

what credit there is in sweeping over a child’s first sapd castle and 
•another wave may evidently wipe out his second, but both would 
have been swamped just as effectually, and almost as soon, on a 
perfectly calm day. 





The annual ^ labour of every nation is the fund which originally 
supplies it with all the necessaries and conveniencies of life - which 
it annually consumes, and which consist al^ys either in the im- 
mediate produce of that labour, or in what is purchased with that 
produce from other nations. 

According therefore, as this produce, or what is purchased with 
it, bears a greater or smaller proportion to the number of those who 
are to consume it, the nation will be better or worse supplied with 
all the necessaries and conveniencies for which it has xcasion.® 

But this proportion must in every nation be regulated by two 
different circumstances; first, by the skill, dexterity, and judgment 
with which its labour is generally applied; * and, secondly, by the 
proportion between the number of those who are employed in use- 
ful labour, and that of those who are not so employed.® Whatever 
be the soil, climate, or extent of territory of any particular nation, 
the abundance or scantiness of its annual simply must, in that par- 
ticular situation, depend upon those two circumstances. 

The abundance or scantiness of this supply too seems to depend 

^This word, with “annually” just below, at once marks the transition 
from the oldenBritish economists’ ordinary bractice of regarding the wealth 
of a nation as an accumulated fund. Follovi^g the physiocrats. Smith sees 
that the important thing is how much can be produced in a given time. 

‘Cp. with this phrase Locke, Some Considerations of the Consequences^ 
of the Lowering of Interest and Raidng the Value of Money, ed. of 1696, 
p. 66, “the intrinsic natural worth of anything consists in its fitness to sup- 
ply the necessities or serve the conveniencies of human life.” 

'Ihe implication that the nation’s welfare is to be reckoned by the av- 
erage welfare of its members, not by the aggregate, is to be noticed). 

* Ed. I wads “with which labour is generally applied in it.” 

” This second circumstance may be stretched so as to include the duration 
and intensity of the labour of those who are usefully employed, but an- 
other important drcumptance, the quantity and quality of ^e accumulated 
instruments of produ(/on, is altogether omitted. 



of each of those methods: and, thirdly and lastly, what are the 
j'easons and causes which have induced almost all mddern govern- 
ments to mortgage some part of this revenue, or to contract debts, 
and what have been the effect"- of those debts upon the real wealth, 
the annual produce of the land and labour of the society. 

Read in conjunction with the first two paragraphs, this sentence makes 
it clear that the wealth of a nation is to be reckoned by its per capita in- 
come. But, this view is ofteif temporarily departed from in the course of 
the work; ‘see the index, s.v. Wealth. 



Of the Causes of Improvement in the uMuctive Powers of Labour, 
and of the Order according to v^h its Produce is naturally 
distributed anAni the different^tnks of the People. 

chapter I 


The greatest improvement ® in the productive powers of labour, 
and the greater part of the skill, dexterity, and judgment with 
which it is any where directed, or applied, seem to have been the 
effects of the division of labomr. 

The effects of the division of labour, in the general business of 

^TMs phrase, if used at all b^ore this time, was not a familiar one. Its 
presence here is probably due to a passage in Mandeville, Fable oj the Bees, 
pt. ii. O729) did. vi., p. 335: “Cieo. . . . when once men come to be gov- 
erned by written laws, all the rest com* on apace ... No number of men, 
when once they enjoy quiet, and no mak needs to fear his neighbour, will 
be long without learning to divide and subdivide their labour. Hoa. 1 don’t 
understand you. Cieo Man, as I have hinted before, naturally loves to im- 
itate what he sees others do, which is the reason that savage people all do 
the same thing; this hinders them from meliorating their condition, though 
they are always wishing for it; but if ms^ll wholly apply himself to the 
making of bows and arrows, whilst afti^u provides food, a third builds 
huts, a fourth jmakes garments, and a fifth utensils, they not only become 
useful to one another, but the callings and employments themselves will, in 
the same number of years, receive much greater improvements, than if all 
' had been promiscuoudy followed by every one of the five. Hoa. I bdieve 
you are perfectly right there; and the truth of what you say is in nothing so 
tonspicuous as it is in watch-making, which is come to a higher degree of 
I wrfection than it would have been arrived at yet, if the whole had always 
emained the employment of one person; and I am persuaded that even the 
’enty we have of clocks and watches, as wdl as the exactiibiSs and beauty 
ey may be made of, are chiefly owing to the division that has been made 
that art into many branches.” The index contains, "Labour, The useful- 
« of dividing and subdividing it.” Joseph Harris, Essay upon Money and 
'^1 i 7 S 7 i pt. i , § 12, treats of the “usefulness of distinct trades," or ‘khd 
ntages accruing to mankind from thdr betaking themselves severallu t/ 
fnt occupations,” but does not use the phrase “division of labour./ / 
.'d. I reads “improvements.” 




society, will be more easily understood, by considering in wh. 
manner ii operates in somi particular manufactures. It is co, 
monly supposed to .be carried furthest in some very trifling ont 
not perhaps that it really is carried further in them than in others 
of more importance; -but in those trifling manufactures which are 
destined to supply the small wants of but a small number of peo- 
ple, the whole number ^ workmen must necessarily be small ; and 
those employed in every different branch of the work can often bt 
collected into the same workhouse, and placed at once under the ^ 
view of the spectatot. In those great manufactures, on the con- 
trary, w'hich are destined to supply the great wants of the great 
body of the people, every difftfent branch of the work employs so 
great a number of workmej^, that it is impossible to collect them all 
into the same workhouse. We can seldom see more, at one time, 
than those employed in one single branch. Though in such manu- 
factures,® therefore, the w’ork may really be divided into a much 
greater number of parts, than in those of a more trifling nature, 
the division is not near so obvious, and has accordingly been much 
less observed. 

To take an example, therefore,* from a very trifling manufac- 
ture; but one in which the division of labour has been very often 
taken notice of, the trade of the pin-maker; a w’orkman not edu- 
cated to this business (which the division of labour has rendered a 
distinct trade) ,® nor acquainted with the use of the machinery em- 
ployed in it (to the invention of which the same division of labour 
has probably given occasion), cqpld scarce, perhaps, with his ut- 
most industry, make one pin in a day, and certainly could not make 
twenty. But in the way in wjiich this business is now carried on, 
not only the whole work is aAeculiar trade, but it is divided into a 
number of branches, of whiqjRjhe greater part are likewise peculiar 
trades. One man draws out^e wire, another straights it, a third 
cuts it, a fourth points it, a fifth grinds it at the top for receiving 
the head; to make the head requires two or three distinct opera- 
tions; to put it on, is a peculiar business, to whiten the pins is an- 
other; it is even a trade by itself to put them into the paper; and 
the important business of making a pin is, in this manner, divided 
into about eighteen distinct operations, which, in some manufacto- 

* Ed. I reads “Though in them.” 

'Another and perhaps more important reason for taking an example like 
that which follows is the possibility of exhibiting the advantages of division 
of falyur in statistical form. 

vlus parenthesis would alone be sufficient to show that those are wrong 
whl^bdieve Smth did not include the separation of employments in /divi- 
sion of Iahniir.r 

thE^leaclftfs'Saa'silQootlierfe ot tne imen, 
or to tht dyers and dressers of the cloth! The nature of agriculture, 
indeed, does not admit of so many subdivisions of labour, por of so 
complete a separation of pne business from another, as ipanufac- 
tures. It is impossible to separate so entirely, the business of the 
grazier from that of the corn-farmer, as the trade of the carpenter 
is. commonly separated froiS'that of the smith. The spinper is al- 
most always a distinct person from the weaver; but the ploughman, 
the harrower, the sower of the and the reaper of the corn, are 
often the same. The occasions fd^hcse different sorts of labour re- 
turning with the different season^K the year, it is impossible that 
one man should be constantly enSeyed in any onc'of them* This 
impossibility of making so complSland entire a Reparation of all 
the different branches of labour empoyed in agriculture, is perhaps 
the reason why the improvement of the productive powers pf labour 
in this art, does not always keep paeg with their' improvement in 
manufactures. The most opulent nations, indeed, generally excel all 
their neighbours in agriculture as well as in manufactures; but they 
are commonly more distinguished by their superiority in the latter 
than in the former. Their lands are in general better cultivated, and 
having more labour and expence bestowed upon them, produce 
wsaw <Jaa cstesA. a.u.du.a.tUKai fetlU.t'y the- ground.. 

But this ^ superiority of produce is seldom much more than in pro- 
portion to the superiority of labour and expence. In agriculture, the 
labour of the rich country is not always mirtdi more productive than 
that of the poor; or, at least, it is never so much more productive, as 
it commonly is in manufactures. The#:orn of the rich country, there- 
fore, will not always, in the same degree of goodness, come cheaper 
to market than that of the poor. The corn of Poland, in the same de- 
gree of goodness, is as cheap as that of France, notwithstanding the 
superior opulence and improvement of the latter country. The com 
of France is, in the corn provinc^^^lly as good, and in most years 
nearly about the same price with the corn of England, though, in 
opulence and improvement, France is perhaps inferior to England. 
The com-lands of England, however, are better cultivated than 
hose of France, and the corn-lands ® of France are said to be much 
etter cultivated than tnose of Poland. But though the poor coun- 
7, notwithstanding the inferiority of its cultivation, can, in some 
asure, rival the rich in the cheapness and goodness o^its corn, it 
pretend to no such competition in its manufactures; at least if 

'll reads “the.” 

1i reads “the lands” here and in the line above. 

nes^ are aU pSforme^bj'aistinSniaifftSJ'Tribil’gKrtoi a-aRrfv.'^.. , 

'man will ^sometimes perform two or three of them.® I have seen a 
small manufactory of this kind where ten men only were employed, 
and where some of them consequently performed two or three dis- 
tinct operations. But though they were yfiry poor, and therefore but 
indiffepently accommodated with thi*''necessary machinery, they 
could, when they exerted themse^e's, make among them about 
twelve pounds of pins in a day. Tnere are in a pound upwards of 
four thousand pin’s of a middling «ze. Those ten persons, therefore, 
could' make among them upwarcpof forty-eight thousand pins in a 
day. Each person, therefore, making a tenth part of forty-eight 
thousand pins; might be considered as making four thousand eight 
hundred pins in a day. But if they had all wrought separately and 
independently, and without any of them having been educated to 
this peculiar business, they certainly could not each of them have 
made twenty, perhaps not oge pin in a day; that is, certainly, not 
the two hundred and fortieth, perhaps not the four thousand eight 
hundredth part of what they are at present capable of performing, 
in consequence of a proper division and combination of their dif- 
ferent operations. 

In every other art and manufacture, the effects of the division of 
labour are similar to what they are in this very trifling one; though, 
in many of them, the labour can neither be so much subdivided, nor 
reduced to so great a^simplicity of operation. Thejdivision of labour, 
however, so far as it can»be introduced, gccasions, in every art, a 
proportionable increase of the productive powers, of labour. The 
separation of different trades i^nd employments from one another, 
seems to have taken place, in consequence of this advantage. This 
separation too is generally carried furth^ in those countfies which 
enjoy the highest degree of industry and improvement ; what is the 
work of one man in a rude state of safety, being gen erally thatjot 
several in an improvejkone. In tyeiry imprf5VEd"socrety, the farmer 
is'generally nothing bffl||PlarmeB|^he manufacturer, nothing but a 
manufacturer. The kbour too wnjch is necessary to produce any 
one complete manufacture, is almost always divided among a great 
number of hands. How many different trades are employed in each 
branch of the linen and woollen manufactures, from the growers of 

_ “In Adam^Smith’s Lectures, p. 164, the business is, as here, divided into 
eighteen operations. This number is doubtless taken from the Ettcyclopidie, 
tom. V. (published in i 7 SS), s.v. Bpinglc. The article is ascribed to M. De- 
laire,^ “qui decrivait la fabrication de I’epingle dans les ateliers mSme des 
ouvriers,” p. 807. In some factories the division was carried fUTtler. E. 
Chambers, Cyclopcedia, vol. ii., and ed., 1738, and 4th ed., 1741, sl. Pin. 
makes the number of separate operations twentv-five. . * 



those manufactures suit the soil, climate, an(| situation of the rich 
country. The silks of France are better and cheaper than those of 
England, because the silk manufacture, at least under the present 
high duties upon the importation of silk, does nut so well suit 
the climate of England as that of Frabce.® But the hard-ware and 
the coarse woollens of England are beyWd all comparison superior 
to those of France, and much cheaper fco in the same degree of 
goodness.^® In Poland there are said to be r arce any manufactures 
of any kind, a few of those coarser househ^ manufactures except- 
ed, without which no country can well subsist. 

“This great increase of the. quantity of wqrk, which, in conse- 
quence of the division of labour, the same number of people are cap- 
able of performing, is owing to three different circumstances; first, 
to the increase of dexterity in every particular workman; secondly, 
to the saving of the time which is commonly^lost in passing from 
one species of work to another; and lastly, to the invention of a 
great number of machines which facilitate and abridge labour, and 
enable one man to do the work of many.^® ^ 

First, the improvement o f the d exterity of the workman necessar- 
ily increases*the quantity of thework he'can perform; and the divi- 
sion of labour, by reducing every man’s business to some one simple 
operation, and by making this operation the sole employment of his 
life, necessarily increases very much the dexterity of the workman. 
A common smith, who, though accustomed to Jjandlfe the hammer, 
has never been used to make nails, if upon ^me particular occasion 
he is obliged to attempt it, will scarce, I an/assured, be able to make 

above two or three hundred nails in a day, and those too very bad 


"Ed. I reads “because the silk manufacture does not suit the climate of 

” In Lectures, p. 164, the comparison is between , English and French 
"toys,” i e., small metal articles. 

'^Ed. I places “in consequence of the divmVi o^^pur” here instead of 
in the line above. 

“ “Pour la « 41 erite du travail et la petition de iWvrage, elles depend- 
ent entierement de la multitude des ouvners rassembles. Lorsqu’une manu- 
facture est nombreuse, chaque operation occupe un homme diSdrent. Tel 
ouvrier ne fait et ne fera de sa vie qu’une seule et unique chose; tel autre 
une autre chose: d’ou il arrive que chacune s’execute bicn et promptement, 
et que I’ouvragc le mieux fait est encore celui qu’on a a meilleur marchd. 
D’ailleurs le gout et la fa^on se perfectionnent n^cessairement entre un grand 
nombre d’ouvriers, parce qu’il est difficile qu’il ne s’en rencontre quclques- 
uns capables de r£flechir, de combiner, et de trouver enfin le seul moyen qui 
puisse Ics pettre audessus de leurs semblables; le moyen ou d’epargner la 
matierc, 01 d’allonger le temps, ou de surfaire I’industrie. soit par une ma- 
diine nouuelle, soit par une manoeuvre plus commode.” — Encydopidie, tom 
>• (1751), p. 717, s.v. Art. All three advantages mentioned in the text above 
are includ^ here. 



ones.^® A smith who jias been accustomed to make nails, but whost 
sole or principal business has not been that of a nailer, can seldom 
with his utmost diligence make more than eight hundred or a thous- 
and n«ls in a day. I have seen several boys under twenty years of 
age who had never exercised any other trade but that of making 
nails, and who, when thfey exerted themselves, could make, each of 
them, upwards of two tUftSand three hundred nails in a day.^'* The 
making of a nail, howevflfisby no means one of the simj'lest opera- 
tions. The same person^ilows the bellows, stirs or mends the fire as 
there is occasion, heats the iron, and forges every part of the nail: 
In forging the head too he is obliged to change his tools. The differ- 
ent operations into which the making of a pin, or of a metal but- 
ton, is subdivided, are all of them much more simple, and the dex- 
terity of the person, of whose life it has been the sole business to 
perform them, is usyally much greater. The rapidity with which 
some of the operations of those manufactures are performed, ex- 
ceeds what the human hand could, by those who had never seen 
them, be supposed capable of acquiring. 

Secondly, the advantage which is_ ^ined by saving the t ime com- 
monly lost in passing from one sortoTwork to anotlw, is much 
greater than we should at first view be apt to imagine it. It is impos- 
sible to pass very quickly from one kind of work to another, that is 
carried on in a different place, and with quite different tools. A 
country weaver,'” who cultivates a small farm, must lose a good 
deal of time in passing from his loom to the field, and from the field 
to his loom. When the tw'o trades can be carried on in the same 
workhouse, the loss of time is no doubt much less. It is even in this 
case, however, very considerable. A man commonly saunters a little 
in turning his hand from one sort of employment to another. When 
he first begins the new work he is seldom very keen and hearty; his 
mind, as they say, d|es not go, to it, and for some time he rather tri- 
fles than applies tD^)d purpose. The habit of sauntering and of in- 
dolent careless application, w^ich is naturally, or ratheV necessarily 
acquired by every country workman w'ho is obliged to change his 
work and his tools every half hour, and to apply his hand in twenty 
different ways almost every day of his life; renders him almost al- 
ways slothful and lazy, and incapable of any vigorous application 

"In Llclures, p. i66, “a country smith not accustomed to make nails will 
work very hard for three or four hundred a day and those too v&y bad." 

“ In Lectures, p. t66, “a boy used to it will easily make two thwsand and 
those incomparably better ” j , 

Lectures, p 2SS, it is implied that the labour of making a button wa^ 
divided among eighty persons. 

“The same evampic occurs in Lectures, p. i66. 


even on the most pressing occasions. Independent, therefore, of his 
deficiency in pbint of dexterity, this cause alonfe must always reduce 
considerably the quantity of work which he is capable of perform- 

Thirdly, and lastly, every body must be sensible how much la- 
bour is facilitated and abridged by the application of proper ma- 
chinery. It is unnecessary to give any a^ple.^'^ I shall only ob- 
serve, therefore,'® that the invention of alM^ose machines h.y which 
labour is so much facilitated and abridged, ^ems to have been orig- 
inally owing to the division of labour^Men are much more likely to 
discover easier and readier methods of attaining any object, when 
the whole attention of their minds is directed towards that single 
object, than when it is di ssipa ted among a great variety of things. 
But in consequence of the division of labour, the whole of every 
man’s attention comes naturally to be directed', towards some one 
very simple object. It is naturdly to be expected, therefore, that 
some one or other of those who are employed in each particular 
branch of labour should soon find out easier and readier methods of 
performing their own particular v/ork, wherever the nature of it ad- 
mits of such improvement. A great part of the machines made use 
of in those manufactures in which labour is most subdividedv 
were originally the inventions of common workmen, who, being each 
of them employed in some very simple operation, naturally turned 
their thoughts towards finding out easier and readier methods of 
performing it. Whoever has been much accustomed to visit such 
manufactures, must frequently have been shewn very pretty ma- 
chines, which were the inventions of such workmen, in order to 
facilitate and quicken their own particular part of the work. In the 
first fire-engines,®' a boy was constantly employed to open and shut 
alternately the communication between the boiler and the cylinder, 
according as the piston either ascended dr deseeded. One of those 
boys, who loved to play with his comp^pions, a|picved that, by ty- 
ing a string fw)m the handle of the vajwe which opened this com- 
munication to another part of the machine, the valve would open 
and shut without his assistance, and leave him at liberty to divert 
himself with his play-fellows. One of the greatest improvements 
that has been made upon this machine, since it was first invented, 

"Examples are given in Lectwes, p. 167: “Two men and three horses will 
do more in a day with the plough than twenty men without it. The miller 
and his servant will do more with the water mill than a dozen with the hand 
mill, though it too be a machine.” 

“ Ed. 1 reads “I shall, therefore, only observe.” 

“ Ed. I reads “machiifts employed.” “ Ed. i reads “of common." 



was in this manner the discovery of a boy who wanted to save his 

own labour.®^ ' “ 

■All the improvements in machinery, however, have by no means 
been the inventions of those who had occasion to use the machines. 
Many improvements have beqn made by the ingenuity of the mak- 
ers of the machines, when t/ make them became the business of a 
peculiar trade; and some by that of those who are called philoso- 
phers or men of speculation, whose trade it is not to do any thing, 
but to observe every Aing; and who, upon that account, are often 
capable of combining together the powers of the most distant and 
dissimilar objects.^® In the progress of society, philosophy or spec- 
ulation becomes, like every other employment, the principal or sole 
trade and occupation of a particular class of citizens. Like every 
other employment too, it is subdivided into a great number of dif- 
ferent brandies, each of which affords occupation to a peculiar tribe 
or class of philosof)hers; and this subdivision of employment in 
philosophy, as well as in every other business, improves dexterity, 
and saves time. Each individual becomes more expert in his own pe- 
culiar branch, more work is done upon the whole, and the quantity 
of science is considerably increased by it.®^ 

“This pretty story is larecly, at any rate, mythical. It appears to have 
grown out of a misreading (not necessarily by Smith) of the following pas- 
sage; “They used before to work with a buoy in the cylinder enclosed in a 
pipe, which buoy rose when the steam was strong, and opened the injection, 
and made a stroke; thereby they were capable of only giving six, eight or 
ten strokes in a minute, till a boy, Humphry Potter, who attended the en- 
gine, added (what he called scoggan) a catch that the beam Q always 
opened ; and then it would go fifteen or sixteen strokes in a minute. But this 
being perplexed with catches and strings, Mr. Henry Beighton, in an engine 
he had built at Newcastle-on-Tyne in 1718, took them all away, the beam 
itself simply supplying all much better.” — J. T. Desaguliers, Course of Ex- 
perimental Philosophy, vol. ii., 1744, p. 533. From pp. 469, 471, it appears 
that hand labour was originally used before the “buoy" was devised. 

“In Lectures, p. 167, the invention of the plough is conjecturally attrib- 
uted to a fanner and that of the hand-mill to a slave, while the invention of 
the water-wheel and the steam engine is credited to philosophers. Mande- 
ville is very much less favourable to the claims of the philosophers: “They 
arc very seldom the same sort of people, those that invent arts and improve- 
ments in them and those that inquire into the reason of things: this latter is 
most commonly practised by such as arc idle and indolent, that are fond of 
retirement, hate business and take delight in speculation; whereas none suc- 
ceed oftener in the first than active, stirring and laborious men, such as will 
put their hand to the plough, try experiments and give all their attention to 
what they are about .” — Fable of the Bees, pt. ii. (1729), dial, iii., p. iji. He 
goes on to give as examples the improvements in soap-boiling, grain-dyeing, 
etc. ^ 

“ The advantage of producing particular commodities wholly or chiefly in 
-the countries most naturally fitted for their production is recognised below, 
p. 42S1 but t^ fact that division of labour is nece^ary for its attainment is 
not noticed. The fact that division of labour allows different workers to be 



It is the great multiplication of the productions of all the differ- 
ent arts, in consequence of the division of labour, which occasions, • 
in a well-governed society, that universal opulence which extends 
itself to the lowest ranks of the people. Every workman has a great 
quantity of his own work to dispose of beyond what he himself has 
occasion for; and every other workmkn being exactly in the same 
situation, he is enabled to exchange a great quantity of his own 
goods for a great quantity, or, what comes to the same thing, for the 
price of a great quantity of theirs. He supplies them abundantly 
with what they have occasion for, and they accommodate him as 
amply with what he has occasion for, and a general plenty diffuses 
itself through all the different ranks of the society. 

Observe the accommodadon of the most common artificer or day- 
labourer in a civilized and thriving country, and you will perceive 
that the number of people of whose industry a part, though but a 
small part, has been employed in procuring him this accommoda- 
tion, exceeds all computation. The woollen coat, for example, which 
covers the day-labourer, as coarse and rough as it may appear, is 
the produce of the joint labour of a great multitude of workmen. 
The shepherd, the sorter of the wool, the wool-comber or carder, the 
dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, 
with many others, must ill join their different arts in order to com- 
plete even this homely production. How many merchants and car- 
riers, besides, must have been employed in transporting the mate- 
rials from some of those workmen to others who often live in a very 
distant part of the country! how much commerce and navigation in 
particular, how many ship-builders, sailors, sail-makers, rope-mak- 
ers, must have been employed in order to bring together the differ- 
ent drugs made use of by the dyer, which often come from the re- 
motest corners of the world! What a variety of labour too is neces- 
sary in order to produce the tools of the meanest of those workmen I 
To say nothing of such complicated machines as the ship of the 
sailor, the mill of the fuller, or even the loom of the weaver, let us 
consider only what a variety of labour is requisite in order to form 
that very simple machine, the shears with which the shepherd clips 
the wool. The miner, the builder of the furnace for smelting the ore, 
the feller of the timber, the burner of the charcoal to be made use of 
in the smelting-house, the brick-maker, the brick-layer, the work- 
men who attend the furnace, the mill-wright, the forger, the smith, 

put exclusively to the kind of-work for which they are best fitted by quali- 
ties not acquired by education and practice, such as age, sex, ^e and strength, 
is in part ignored and in part denied below, pp. 15, 16. The disadvantage of 
division of labour or specialisation is dealt with below, pp. 734-736. 



must all of them joir^ their different arts in order to produce them. 

* Were we to examine, in the same manner, all the different parts of 
his dress and household furniture, the coarse linen shirt which he 
wears next his skin, the shoes which cover his feet, the bed which he 
lies on, and all the different parts which compose it, the kitchen- 
grate at which he prep^es his victuals, the coals which he makes 
use of for that purpoSfcdug from the bowels of the earth, and 
brought to him perhaps^ a long sea and a long land carriage, all 
the other utensils of lijis kitchen, all the furniture of his table, the 
knives and forks, the earthen or pewter plates upon which he serves 
up and divides his victuals, the different hands employed in prepar- 
ing his bread and his beer, the glass window which lets in the heat 
and the light, and keeps out the wind and the rain, with all the 
knowledge and art requisite for preparing that beautiful and hai)i)y 
invention, without jvhich these northern parts of the world could 
scarce have afforded a very comfortable habitation, together w’ith 
the tools of all the different workmen employed in producing those 
different conveniencies; if we examine, I say, all these things, and 
consider w’hat a variety of labour is employed about each of them, 
we shall be sensible that without the assistance and c(i-operation of 
many thousands, the veiy meanest person in a civilized country 
could not be provided, even according to, what we very falsely ima- 
gine, the easy and simple manner in which he is coinmonly actoni- 
modaled. Compared, indeed, will- the more extravagant liixuiy of 
the great, his accommodation must no doubt appear extremely sim-' 
pie and easy; and yet it may be true, perhaps, that the accommoda- 
tion of an European prince d(X!s not always so much exceed that of 
an industrious and frugal peasant, as the accommodation of the lat- 
ter exceeds that of many an .African king, the absolute master of the 
lives and liberties of ten thousand naked savages.-Jj^ 

“ ThibWjjaragraph was probably taken bodily from the MS. of the auth- 
or’s lectmcs. It appears to be founded on Mun, England's Treasure by For- 
raign Trade, chap, iii., at end; Locke, Civil Government , S 4t; Mandcvillc, 
Fable of the Bees, pt. i., Remark P, and cd., p. iSz, and perhaps Xlar- 
lis, Essay upon Money and Coins, pt. i., § i*. Sec Lectures, pp. ibi-ibi and 


Of labour 

This division of labour, from which so many advantages are de- 
rived, is not originally the effect of any human wisdom, which fore- 
sees and intends that general opulence to which it gives occasion.' 
It is the necessary, though very slow and gradual, consequence of a 
certain propensity in human nature w'hich has in view no such ex- 
tensive utility: the propensity to truck, barter, and exchange one 
thing for another. 

Whether this propensity be one of those original principles in hu- 
man nature, of which no further account can be given ; or whether, 
a.s seems more probable, it be the necessary consequence of the fac- 
ulties of reason and speech, it belongs not to our present subject to 
enquire. It is common to all men, and to be found in no othei race 
of animals, which seem to know neither this nor any other species of 
contracts. Two greyhounds, in running clown the same hare, have 
sometimes the appearance of acting in some sort of concert, Each 
turns her towards his companion, or endeavours to intercept her 
when his companion turns her towards hiirtself. This, however, is 
not the effect of any contract, but of the accidental concurrence of 
their pa.ssions in the same object at that particular time.VNobody 
ever 5aw a dc^make a fair and drliberale e.vchan^ge of one bone for 
another with another dog.- Is'obody ever saw one animal by its ges- 
tures and natural cries signify to another, this is mine, that yours; 
1 am willing to give this for tliat. When an animal wants to obtain 
something either of a man or of another animal, it has no other 
means of persuasion but to gain the favour of those whose service it 


it is the effect of any consdous regulation by the state or society, 
like the “law’ of Sesostris," that tvery man should follow the employment of 
his father, referred to in the corresponding passage in Lectures, p. i68. The 
denial that it is the effect of individual iidsdom recognising the advantage of 
ezerdang special natural^alents comes lower down, p. 15. 

*lt is by no means clear what object there could be in exchanging one bone 
for another. 



requires. A puppy fairas upon its dam, and a spaniel endeavours by 
* a thousand attractions to engage the attention of its master who is 
at dinner, when it wants to be fed by him. Man sometimes uses the 
same arts with his brethren, and when he has no other means of en- 
gaging them to act according to his inclinations, endeavours by 
every servile and fawning attention to obtain their good will. He 
has not time, however, to do this upon every occasion. In civilized 
society he stands at all times in need of the co-operation and assist- 
ance of great multitudes, while his whole life is scarce sufficient to 
gain the friendship of a few persons. In almost every other race of 
animals each individual, when it is grown up to maturity, is entire- 
ly® independent, and in its natural state has occasion for the assist- 
ance of no other living creature. But man has almost constant occa- 
sion for the help of his brethren, and it is in vain for him to expect it 
from their benevolepce only. He will be more likely to prevail if he 
can interest their self-love in his favour, and shew them that it is for 
their own advantage to do for him what he requires of them. Who- 
ever offers to another a bargain of any kind, proposes to do this. 
Give me that which I want, and you shall have this which you want, 
is the meaning of every such offer; and it is in this manner that we 
obtain from one another the far greater part of those good offices 
which we stand in need of. It is not from the benevolence of the 
butcher, the brewer, or the baker, that we e.\'pect our dinner, but 
from their regard to their own interest. We address ourselves, not to 
their humanity but to their self-love, and never talk to them of 
our own necessities but of their advantages. Nobody but a beggar 
chuses to depend chiefly upon the benevolence of his fellow-citizens. 
Even a beggar does not depend upon it entirely. The charity of 
well-disposed people, indeed, supplies him with the whole fund of 
his subsistence. But thoi^feh this principle ultimately provides him 
with all the necessaries of life which he has occasion for, it neither 
does nor can provide him with them as he has occasion for them. 
The greater part of his occasional wants are supplied in the same 
manner as those of other people, by treaty, by barter, and by pur- 
chase. With the money which one man gives him he purchases food. 
The old cloaths which another bestows upon him he exchanges for 
other old cloaths which suit him better, or for lodging, or for food, 
or for money, with which he can buy either food, cloaths, or lodg- 
ing, as he has occasion.^ 


“intirely” in eda. £-5. “Entirely” occurs a little lower down 

m all eds. 

. paragraph is repeated from LeciureSf p. I69^It is founded on Mande- 
viUe, Fable of ike Bees, pt. ii. (1729), dial, vi., pp. 421, 422. 


As it is by treaty, by barter, and by purcl\ase, that we obtain 
from one another the greater part Of those mutual good offices 
which we stand in need of, so it is this same trucking disposition 
which originally gives occasion to the division of labour. In a tribe 
of hunters or shepherds a particular person makes bows and arrows, 
for example, with more readiness and dex^rity than any^other. He 
frequently exchanges them for cattle or for. venison with his com- 
panions; and he finds at last that he can in' this manner gdt more 
cattle and venison, than if he himself went to the field to catch 
them. From a regard to his own interest, therefore, the making of 
bows and arrows grows to be his chief business, and he becomes a 
sort of armourer. Another excels in making the frames and covers 
of their little huts or moveable houses. He is accustomed to be of 
use in this way to his neighbours, who reward him in the same man- 
ner with cattle and with venison, till at last he fiijds it his interest to 
dedicate himself entirely to this emplo3nnent, and to become a sort 
of house-carpenter. In the same manner a third becomes a smith or 
a brazier; a fourth a tanner or dresser of hides or skins, the princi- 
pal part of the clothing of savages. And thus the certainty of being 
able to exchange all that surplus part of the produce of his own 
labour, which is over and above his own consumption, for such 
parts of the produce of other men’s labour as he may have occasion 
for, encourages every man to apply himself to a particular occupa- 
tion, and to cultivate and bring to perfection whatever talent orf 
genius he may possess for that particular species of business.® 

The difference of natural talents in different men is, in reality, 
much less than we are aware of ; and the very different genius which 
appears to distinguish men of different professions, when grown up 
to maturity, is not upon many occasions so much the cause, as the 
effect of the division of labour.® The diff^ence between the most 
dissimilar characters, between a philosopher and a. common street 
Sorter, for example, seems to arise not so much from nature, as 
Ifrom habit, custom, and education. When they came into the world, 
and for the first six or eight years of their existence, they were, per- 
haps,'^ very much alike, and neither their parents nor playfellows 
could perceive any remarkable difference. About that age, or soon 
after, they come to be employed in very different occupations. The 

'Lectures, pp. 169-170. 

* This is apparently directed against Harris, Money and Coins, pt. i., § ii, 
and is in accordance with the view of Hume, who asks readers to “consider 
how nearly equal all men are in their bodily force, and even in their mental 
powers and faculties, ere ^cultivated by education.” — “Of the Original Con-' 
tract,” in Essays, Moral and Political, 1748, p. 291. 

’ “Perhaps” is omitted in eds. 2 and 3, and restored in the errata to ed. 4. 


difference of talents, comes then to be taken notice ^f, and widens 
bjr degrees, till at last the vanity of the philosopher is willing to 
acknowledge scarce any resemblance. But without the disposition 
to truck, barter, and exchange, every man must have procured to 
himself every necessary and conveniency of life which he wanted. 
All must have had the saYne duties to perform, and the same work 
to do, and there could hjtve been no such difference of employment 
as could alone give occasion to any great difference of talents.* 

As it is this disposition which forms that difference of talents, so 
remarkable among men of different professions, so it is this same 
disposition which renders that difference useful. Many tribes of an- 
imals acknowledged to be all of the same species, derive from na- 
ture a much more remarkable distinction of genius, than what, an- 
tecedent to custom and education, appears to take place among 
men. By nature a philosopher is not in genius and disposition half 
so different from a street porter, as a ma.stiff is from a greyhound, or 
a greyhound from a spaniel, or this last from a shepherd’s dog. 
Those different tribes of animals, however, though all of the same 
species, are of scarce any use to one another. The strength of the 
mastiff is not in the least supported either by the swiftness of the 
greyhound, or by the sagacity of the spaniel, or by the docility of 
the shepherd’s dog. The effects of those different geniuses and tal- 
ents, for want of the power or disposition to barter and exchange, 
caimot be brought into a common stock, and do not in the least 
contribute to the better accommodation and conveniency of the 
species. Each animal is still obliged to support and defend itself, 
separately and independently, and derives no sort of advantage 
from that variety of talents with which nature has distinguished its 
fellows. Among men, on the contrary, the most dissimilar geniuses 
are of use to one another; the different produces of their respective 
talents, by the gtneral disposition to truck, barter, and exchange, 
being brought, as it were, into a common stock, where every man 
may purchase whatever part of the produce of other men’s talents 
he has occasion for. 

• Lectures, pp. 170-171. 



As it is the power of exchanging that gives occasion to the division 
of labour, so the extent of this division must always be limited by 
the extent of that power, or, in other words, by the extent of the 
market.lwhen the market is very small, no person can have any en- 
couragement to dedicate himself entirely to one employment, for 
want of the power to exchange all that surplus part of the produce 
of his own labour, which is over and above his own consumption, 
for such parts of the produce of other men’s labour as he has occa- 
sion for. \ 

There are some sorts of industry, even of the lowest kind, which 
can be carried on no where but in a great town. A porter, for ex- 
ample, can find employment and subsistence in no other place. A 
village is by much too narrow a sphere for him; even an ordinary 
market town is scarce large enough to afford him constant occupa- 
tion. In the lone houses and very small villages which are scattered 
about in so desert a country as the Highlands of Scotland, every 
farmer must be butcher, baker and brewer for his own family. In 
such situations we can scarce expect to find even a smith, a carpen- 
ter, or a mason, within less than twenty miles If another of the 
same trade. The scattered families that live at eight or ten miles 
distance from the nearest of them, must learn to perform themselves 
a great number of little pieces of work, for which, in more populous 
countries, they would call in the assistance of those workmen. 
Country workmen are almost every where obliged to apply them- 
selves to all the different branches of industry that have so much 
affinity to one another as to be employed about the same sort of ma- 
terials. A country carpenter deals in every sort of work that is made 
of wood: a country smith in every sort of work that is made of iron. 
The former is not only a carpenter, but a joiner, a cabinet maker, 
and even a carver in w9od, as well as a wheelwright, a ploughwright, 
a cart and waggon maker. The employments of the latter are still 


20 the wealth of nations 

the antient world, long considered as a most wonderful and danger- 
ous exploit of navigation. It was late before even the Phenicians and 
Carthaginians, the most skilful navigators and ship-builders of 
those old times, attempted it, pd they were for a long time the only 
nations that did attempt it. 

Of all the countries on the coast of the Mediterranean sea, Egypt 
seems to have been the first in which either agriculture or manufac- 
tures were cultivated and improved to any considerable degree. Up- 
per Egypt extends itself nowhere above a few miles from the Nile, 
and in Lower Egypt that great river breaks itself into many differ- 
ent canals,'^ which, with the assistance of a little art, seem to have 
afforded a communication by water-carriage, not only between all 
the great towns, but between all the considerable villages, and even 
to many farm-houses in the country; nearly in the same manner as 
the Rhine and the :Maese do in Holland at present. The extent and 
easiness of this inland navigation was probably one of the principal 
causes of the early improvement of Egypt. 

The improvements in agriculture and manufactures seem like- 
wise to have been of very great antiquity in the provinces of Ben- 
gal in the East Indies, and in some of the eastern provinces of 
China; though the great extent of this antiquity is not authenticat- 
ed by any histories of whose authority we, in this part of the world, 
are well assured. In Bengal the Ganges and severd other great riv- 
ers form a great number of navigable canals ® in the same manner 
as the Nile does in Egypt. In the Eastern provinces of China too, 
several great rivers form, by their different branches, a multitude of 
canals, and by communicating with one another afford an inland 
navigation much more extensive than that either of the Nile or the 
Ganges, or perhaps than both of them put together. It is remark- 
able that neither the antient Egyptians, nor the Indians, nor the 
Chinese, encouraged foreign commerce, but seem all to have derived 
their great opulence from this inland navigation. 

All the inland parts of Africa, and all that part of rAsia which lies 
any considerable way north of the Euxine and Caspian seas, the an- 
tient Scythia, the modern Tartary and Siberia, seem in all ages of 
the world to have been in the same barbarous and uncivilized state 
in which we find them at present. The sea of Tartary is the frozen 
ocean which admits of no navigation, and though some of the great- 
est rivers in the werH run through that country," they are at too 

~ It is only in recent times that this word has become applicable especially 
to artificial channels; see Murray, Oxford English Dictionary, s.v. 

“ Ed. I reads “break themselves into many canalk” 

* The real difficulty is that the mouths of the rivers are in the Arctic Sea, 


great a distance from one another to carry commerce and communi- 
cation through the greater part of it. There are in Africa none of 
those great inlets, such as the Baltic and Adriatic seas in Europe, 
the Mediterranean and Euxine seas- in both Europe and Asia, and 
the gulphs of Arabia, Persia, India, ‘6engal;.and Siam, in Asia, to 
carry maritime commerce into the interior parts of that great conti- 
nent: and the great rivers of Africa are at too great a distance from 
one another to give occasion to any considerable inland navigation. 
The commerce besides which any nation can carry on by means of 
a river which does not break itself into any great number of branch- 
es or canals, and which runs into another territory before it reaches 
the sea, can never be very considerable; because it is always in the 
power of the nations who possess that other territory to obstruct 
the communication between the upper country and the sea. The 
navigation of the Danube is of very little use toJ;he different states 
of Bavaria, Austria and Hungary, in comparison of what it would 
be if any of them possessed the whole of its course till it falls into 
the Black Sea.^^ 

so that they are separated. One of the objects of the Siberian railway is to 
connect them. 

” Ed. I reads “any one” here. 

“ The passage corresponding to this chapter is comprised in one paragraph 
in Lecturtt, p. 172. 



When the division of labour has been once thoroughly established, 
it is but a very small part of a man’s wants which the produce cf his 
own labour can supply. He supplies the far greater part of them by 
exchanging that surplus part of the produce of his own labour, 
which is over and above his own consumption, for such parts of the 
produce of other men’s labour as he has occasion for. Every man 
thus lives by exchanging, or becomes in some measure a merchant, 
and the society itself grows to be what is properly a commercial so- 

But when the division of laboup first began to take place, this 
power of exchanging must frequently have been very much clogged 
and embarrassed in its operations. One man, we shall suppose, has 
more of a certain commodity than he himself has occasion for, while 
another has less. The former consequently would be glad to dispose 
of, and the latter to purchase, a part of this superfluity. But if this] 
latter should chance to have nothing that the former stands in need] 
of, no exchange can be made between them. The butcher has more 
meat in his shop than he himself can consume, and the brewer and 
the baker would each of them be willing to purchase a part of it. 
But they have nothing to offer in exchange, except the different pro- 
ductions of their respective trades, and the butcher is already pro- 
vided with all the bread and beer which he has immediate occasion 
for. No exchange can, in this case, be made between them. He can- 
not be their merchant, nor they his customers; and they are all of 
them thus mutually less serviceable to one another. In order to 
avoid the inconveniency of such situations, every prudent man in 
every period of society, after the first establishment of the division 
of labour, must naturally have endeavoured to manage his affairs in 
such a manner, as to have at all times by him, besides the peculiar 
produce of his own industry, a certain quantity of some one com- 




modity or other, such as he imagined few people would be likely to 
refuse in exchange for the produce of their industry.^ 

Many different commodities, it is probable, were successively 
both thought of and employed for this purpose. In t he rude ag es of 
societv.j:attle are said to have been the common i nstrument of com- 
merce; and, though they must have been a most’inconvenient one, 
yetlh old times we find things were frequently valued according to 
the number of cattle which had been given in exchange for them. 
The armour of Diomede, says Homer, cost only nine oxen ; but that 
of Glaucus cost an hundred oxen.® Salt is said to be Jhe common in- 
strument of commerce and exchanges in Abyssinia;® a species of 
shells in some parts of the coast of India; dried cod at Newfound- 
land; tobacco in Virginia;^ sugar in some of our West India colo- 
nies; hides or dressed leather in some other countries; and there is 
at this day a village in Scotland where it is not uncommon, I am 
told, for a workman to carry nails instead of money to the baker’s 
shop or the ale-house.® 

In all countries, however, men seem at last to have been deter- 
mined by irresistible reasons to give the preference, for this employ- 
ment, to metals above every other commodity.® Metals can not only 
be kept with as little loss as any other commodity, scarce any thing 
being less perishable than they are, but they can likewise, without 
any loss, be divided into any nfimber of parts, as by fusion those 
parts can easily be reunited again; a quality which no other equally 

* The paragraph has a close resemblance to Harris, Money and Coins, pt. i., 

§§ ig, 20. 

’‘Iliad, vi., 236: quoted with the same object in Pliny, Hist. Nat., lib. xxaiii., 
cap. i. ; Pufendorf, De jure natural et gentium, lib. v., cap. v., § i ; Martin- 
Leake, Historical Account of English Money, 2nd ed., 1745, p. 4 and elsewhere. 

■’ Montesquieu, Esprit des lois, liv. xxii., chap i., note. 

*W. Douglass, A Summary Historical and Political of the First Planting, 
Progressive Improvements and Present State of the British Settlements in 
North America, 1760, vol. ii.. p. 364. Certain law officers’ fees in Washington 
were still computed in tobacco in 1888. — f. J. Lalor, Cyclopaedia of Political 
Science, 188S, s.v. ^oney, p. 879. 

“Playfair, ed. of Wealth of Nations, 1805, vol. i., p. 36, says the explana- 
tion of this is that factors furnish the nailers with materials,.,and during the 
time they are working give them a credit for bread, cheese and chandlery 
goods, which they pay for in nails when the iron is worked up. The fact that 
nails are metal is forgotten at the beginning of the next paragraph in the 
text above. 

* For earlier theories as to these reasons see Grotius, De jure belU et pads, 
lib. ii., cap. xii., § 17; Pufendorf, De jure naturae et gentium, lib. v., cap. i., { 
13 ; Locke, Some Considerations, 2nd ed., i6g6, p. 31 ; Law, Money and Trade, 
170S, ch. i.; Hutcheson, System of Moral Philosophy, 1755, vol. ii., pp. sSi S^; 
Montesquieu, Esprit des lois, liv. xxii., ch. ii.; Cantillon, Essai sur la Nature 
du Commerce en gineral, 173s, pp. 133, 353-337; Harris, Money and Coins, 
pt. i., §S 22-27, and cp. Lectures, pp. 182-183. 



durable commodities possess, and which more than any other qual- 
ity renders them fit to be the instruments of commerce and circula- 
tion. The man who wanted to buy salt, for example, and had noth- 
'ing but cattle to give in exchange for it, must have been obliged to 
,buy sait to the value of a whole ox, or a whole sheep, at a time. He 
could seldom buy less than this, because what he was to give for it 
could seldom be divided without loss; and if he had a mind to buy 
more, he must, for the same reasons, have been obliged to buy 
double or triple the quantity, the value, to wit, of two or three oxen, 
or of two or three sheep. If, on the contrary, instead of sheep or ox- 
en, he had metals to give in exchange for it, he could easily propor- 
tion the quantity of the metal to the precise quantity of the com- 
modity which he had immediate occasion for. 

Different metals have been made use of by different nations for 
this purpose. Iron was the common instrument of commerce among 
the antient Spartans; copper among the antient Romans; and gold 
and silver among all rich and commercial nations. 

Those metals seem originally to have been made use of for this 
purpose in rude bars, without any stamp or coinage. Thus we are 
told by Pliny upon the authority of Timajus, an antient historian, 
that, till the time of Servius Tullius, the Romans had no coined 
money, but made use of unstamped bars of copper, to purchase 
whatever they had occasion for. These rude bars, therefore, per- 
formed at this time the function of money. 

The use of metals in this rude state was attended with two very 
considerable inconveniencies ; first with the trouble of weighing; ® 
and, secondly, with that ^ of assaying them. In the precious metals, 
where a small difference in the quantity makes a great difference in 
the value, even the business of weighing, with proper exactness, re- 
quires at least very accurate weights and scales. The weighing of 
gold in particular is an operation of some nicety. In the coarser met- 
als, indeed, where a small error would be of little consequence, less 
accuracy would, no doubt, be necessary. Yet we should find it ex- 
cessively troublesome, if every time a poor man had occasion either 
to buy or sell a farthing’s worth of goods, he was obliged to weigh 
the farthing. The operation of cissaying is still more difficult, still 
more tedious, and, unless a part of the metal is fairly melted in the 
crucible, with proper dissolvents, any conclusion that can be drawn 

’Plin. Hist. Nat. lib. 33. cap. 3. “Servius rex primus signavit acs. Antea 
rudi uses Romae Timaius tradit.” Ed. i reads “authority of one Remeus, an 
antient author,” Remeus being the reading in the edition of Pliny in Smith’s 
ubrary, cp, Bonar’s Catalogue of the Library of Adam Smith, 1894, p. 87. 
Ed. I does not contain the note. 

“ Ed. I reads “weighing them.” ' Ed. i reads “with the trouble.” 


from it, is extremely uncertain. Before the institution of coined 
money, howevei^. unless they went through this tedious and difficult 
operation, people must always have been liable to the grossest 
frauds and impositions, and instead of a pound weight of pure sil- 
ver, or pure copper, might receive in exchange for their .goods, ari 
adulterated composition of the coarsest ajid cheapest materials, 
which had, however, in their outward appearance, been made to re- 
semble those metals. To prevent such abuses, to facilitate ex- 
changes, and thereby to encourage all sorts of industry and com- 
merce, it had been found necessary, in all countries that have made 
any considerable advances towards improvement, to affix a public 
stamp upon certain quantities of such particular metals, as were in 
those countries commonly made use of to purchase goods. Hence 
the origin of coined money, and of those public offices called 
mints; institutions exactly of the same nature with those of the 
aulnagers and stampmasters of woollen and linen cloth.^^ All of 
them are equally meant to ascertain, by means of a public stamp, 
the quantity and uniform goodness of those different commodities 
when brought to market. 

The first public stamps of this kind that were affixed to the cur- 
rent metals, seem in many cases to have been intended to ascertain, 
what it was both most difficult and most important to ascertain, the 
goodness or fineness of the metal, and to have resembled the sterl- 
ing mark which is at present affixed to plate and bars of silver, or 
the Spanish mark which is sometimes affixed to ingots of gold, and 
which being struck only upon one side of the piece, and not cover- 
ing the whole surface, ascertains the fineness, but not the weight of 
the metal, .\braham w’eighs to Ephron the four hundred shekels of 
silver w'hich he had agreed to pay for the field of Machpelah.^® 
They are said however to be the current money of the merchant, 
and yet are received by weight and not by tale, in the same manner 
as ingots of gold and bars of silver are at present. The revenues of 
the antient Saxqp kings of England are said to have been paid, not 
in money but in kind, that is, in victuals and provisions of all sorts. 

"Aristotle, Politics, i2S7a, 38-41; quoted by Pufendorf, De jure naturae 
et gentium, lib. v., cap. i., § 13. 

“ The aulnager measured woollen cloth in England under 2$ Ed. III., st. 4, 
c. I. See John Smith, Chronicon Rusticum-Commerciale or Memoirs of Wool, 
1747, vol. i., p. 37. The stampmasters of linen cloth in the linen districts of 
Scotland were appointed under 10 Ann., c. 21, to prevent “divers abuses and 
deceits” which “have of late years been used in the manufacturies of linen 
cloth . . . with respect to the lengths, breadths and unequal sorting of yarn, 
which leads to the great debasing and undervaluing of the said linen cloth 
both at home and in foreign parts.” — Statutes of the Realm, vol. ix., p. 682. 

" Genesis xxiii. j 6 . 

28 the wealth of nations 

creditor, and ha%'e jometimes produced a greater and more univer- 
sal revolution in the fortunes of private persons, fhan could have 
Been occasioned by a very great public c^lamity.^* 

It is in this manner that money has become in all civilized nations 
the universal instrument of commerce, by the intervention of which 
goods of all kinds are bought and sold, or exchanged for one an- 

What are the rules which men naturally observe in exchanging 
them either for money or for one another, I shall now proceed to 
examine. These rules determine what may be called the relative or 
exchangeable value of goods. 

The word value, it is to be observed, has two different meanings, 
and sometimes expresses the utility of some particular object, and 
sometimes the power of purchasing other goods which the posses- 
sion of that object conveys. The one may be called ‘‘value in use;” 
the other, “value in exchange.” The things which have the greatest 
value in use have frequently little or no value in exchange; and on 
the contrary, those which have the greatest value in exchange have 
frequently little or no value in use. nothing is more useful than wa- 
ter; but it will purchase scarce any thing; scarce any thing can be 
had in exchange for it. .-V diamond, on the contrary, has scarce any 
value in use; but a very great quantity of other goods may fre- 
quently be had in exchange for it.*-’’ 

In order to investigate the principles which regulate the ex- 
changeable value of commodities, I shall endeavour to shew, 

First, what is the real measure of this exchangeable value; or, 
wherein consists the real price of all commodities. 

Secondly, what are the different parts of which this real price is 
composed or made up. 

®®The subject of debased and depreciated coinage occurs again below, pp. 
35, 194, 516-322, 882-886. One of the reasons wby gold and silver became the 
most usual forms of money is dealt with below, pp. 171, 172. See Coin and 
Money in the index. « 

“In Lecturer, pp. 182-igo, where much of this chapter is to be found, 
money is considered “first as the measure of value and then as the medium of 
permutation or exchange.” Money is said to have had its origin in the fact 
that men naturally fell upon one commodity with which to compare the value 
of all other commodities. When this conunodity was once selected it became 
the medium of exchange. In this chapter money comes into use from the first 
as a medium of exchange, and its use as a measure of value is not mentioned. 
The next chapter explains that it is vulgarly used as a measure of value be- 
cause it is used as an instrument of commerce or medium of exchange. 

“Lectures, p. 157. Law, Money and Trade, 1705, ch. i. (followed by Harris, 
Money and Coins, pt. i., § 3), contrasts the value of water with that of dia- 
monds. The cheapness of water is referred to by Plato, Eutkydem. 304 B., 
quoted by Pufendorf, De jure naturce et gentium, lib. v., cap. i., S 6; cp. Bar- 
beyrac’s note on i 4. 



And, lastly, '^hat are the different circumstances which some- 
times raise some or all of these different parts of price above, and 
sometimes sink them below their natural or ordinary rate; or, whaf 
are the causes which sometimes hinder the market price, that is, the 
actual price of commodities, from coinciding exactly with what may 
be called their natural price. ; • . 

I shall endeavour to explain, as fully and distinctly as I can, those 
three subjects in the three following chapters, for which I must very 
earnestly entreat both the patience and attention of the reader: his 
patience in order to examine a detail which may perhaps in some 
places appear unnecessarily tedious; and his attention in order .to 
understand what may, perhaps, after the fullest explication which I 
am capable of giving of it, appear still in some degree obscure. I am 
always willing to run some hazard of being tedious in order to be 
sure that I am perspicuous; and after taking the ptmost pains that 
I can to be perspicuous, some obscurity may still appear to remain 
upon a subject in its own nature extremely abstracted. 

* Ed. 1 reads “subject which is.” 



Every man is rich or poor according to the degree in which he can 
afford to enjoy the necessaries, conveniencies, and amusements of 
human life,^ But after th^ division of labour has on ce thorou ghl y 
taken place, it is but a very small part of these with whichT man’s 
own labour ca n supply him. T h e far greater part of t hem lie must 
derive from t he labour of otlier people, and he must be~r lch or poor 
according to the quantity of that labour which he_can comm a nd, or 
jj^ch he can aft'oid to purchase . The value of any commodity, 
therefore, to the person who possesses iv, and who means not to use 
or consume it himself, but to exchange it for other commodities, is 
equal to thj quantity of labour which it enables him to purchase or 
command. Ti abour, therefore, is the real measure of the exchange- 
able value of all commodities.** 

The real price of every thing, what every thing really costs to the 
man who wants to acquire it, is the toil and trouble of acquiring it.* 
What every thing is really worth to the man who has acquired it, 
and who wants to dispose of it or exchange it for something else, is 
the toil and trouble which it can save to himself, and which il can 
impose upon other people. What is bought with money or with 
goods is purchased by labour,® as much as what v.'e acquire by the 
toil of our own body. That money or those goods indeed save us this 
toil. They contain the value of a certain quantity of labour which 
we exchange for what is supposed at the time to contain the value of 
an equal quantity. La^a^wa s the first price, t he orig inal purcha-se- 
money that was paid for dl things. It was not by gQld~nr hy silve r, 
labour, that all the wTal& of the world Ws origin jl^pur- 
chased; and its value, to those who possess It^and who want to ex- 

*** elle-mSme n’est autre chose que la nourriturc, les com* 
moihtfe et les agrements de la vie.”— Cantillon, Essai, pp. i, a. 

Everything in the world is purchased by labour.”— Hume, "Of Com* 
tnercB, m Potitical Discourses, 1752, p. la. 



change it for som# new praditclMns. is predlsely to. tirte qum- 
tity of labour which it c<in emaye tlseiii to pturchise or mMUiirwi. 

Wealth, as Mr. H jEj jes says, powet/ But the person who either' 
acquires, or succeeds tc a great fertune, does not nec!fs*.-.i:Uyacqtate 
or succeed to any pchtical p.cwer. either cIvEi or mlktary. hjfe^iijr- 
tune may. perhaps, afford him the means of acqmirinig both, tewt tine 
mere possession of that fortune does mot necessarily wawey ty> Mta 
either. The power which that possessiau itamedSatehr and directly 
conveys to him. is the power of pea'hasingt a certain coownar'd over 
all the labour, or over all the produce of labour which is then in the 
market. His fortune isgre.tter or less, precisely in prtfioirtion to the 
extent of this power : or to the quantity either oi other men s labour^ 
or, what is the same thing, of the produce of other men's labour, 
which it enables him to purchase or conunand. The exehangpabte 
value of every thing must always he precisely equaj to the extent of 
this power which it conveys to its owner.^ 

But thotigh labour be the real roe.asure of the exchangeable value 
of all commodities, it is not that by which their value is commonly 
estimated. It is often difficult to ascertain the proportion between 
two different quantities of labour. The time spent in two different 
sorts of work will not always alone determine this proportion. The 
different degrees of hardship endured, and of ingenuity exercised, f 
must likewise be taken into account. There may be more labour in » 
an hour's hard work than in two hours business; or in an hour's ’ 
applicatiim lo a trade which it cost ten years labour to learn, than in 
a month’s industry at an ordinary and obvious employment. But it 
is not easy to find any accurate measure either of hardship or inge- 
nuity. In exchanging indeed the different productions of different 
sorts of labour for one another, some allowance is commonly made 
for both. It is adjusted, however, not by any accurate measure, but 
by the higgling and bargaining of the market, according to that sort 
of rough equality which, though not exact, is sufficient for carrying 
on the business oT common life.® 

Every commodity besides, is more frequently exchanged for, and 
thereby compared with, other commodities than with labour. It is 
more natural therefore, to estimate its exchangeable value by the 
quantity of some other commodity than by that of the labour which 
it can purchase. The greater part of people too understand better 

• “Also riches joined with liberality is Power, because it procurcth friends 
and servants: without liberality not so, because in this case they defend not 
but expose men to envy as a prey." — Leviathan, I., x. 

* This paragraph appears first in Additions and Corrections and ed. 3. 

‘ The absence of any reference to the lengthy discussion of this subject fai 
chap. X. is curious. 

32 the wealth of nations 

what is ftieant byta quantity of a particular commodity, than by a 
quantity of labour. The one is a plain palpable object ; the other an 
’ abstract notion, which, though it can be made sufficiently intelli- 
gible, is not altogether so natural and obvious. 

. But when barter ceases, and money has become the common in- 
strument of commerce, every particular commodity is more fre- 
quently exchanged for money than for any other commodity. The 
butcher seldom carries his beef or his mutton to the baker, or the 
brewer, in order to exchange them for bread or for beer; but he car- 
ries them to the market, where he exchanges them for money, and 
afterwards exchanges that money for bread and for beer. The quan- 
tity of money which he gets for them regulates too the quantity of 
bread and beer which he can afterwards purchase. It is more natur- 
al and obvious to him, therefore, to estimate their value by the 
quantity of money, the commodity for which he immediately ex- 
changes them, than by that of bread and beer, the commodities for 
which he can exchange them only by the intervention of another 
commodity; and rather to say that his butcher’s meat is worth 
threepence or fourpence a pound, than that it is worth three or four 
pounds of bread, or three or four quarts of small beer. Hence it 
comes to pass, that the exchangeable value of every commodity is 
I more frequently estimated by the quantity of money, than by the 
j quantity either of labour or of any other commodity which can be 
' had in exchange for it. 

Gold and silver, however, like every other commodity, vary in 
their value, are sometimes cheaper and sometimes dearer, some- 
times of easier and sometimes of more difficult purchase. The quan- 
tity of labour which any particular quantity of them can purchase 
or command, or the quantity of other goods which it will exchange 
for, depends always upon the fertility or barrenness of the mines 
which happen to be known about the time when such exchanges are 
made. The discovery of the abundant mines of America reduced, in 
the sixteenth century, the value of gold and silVer in Europe to 
^ ahout a third of what it had been before.” .As it cost less labour to 
bring those metals from the mine to the market, so when they were 
brought thither ^ they could purchase or command less labour; and 
this revolution in their value, though perhaps the greatest, is by no 
means the only one of which history gives some account. But as a 
measure of quantity, such as the natural foot, fathom, or handful, 
which is continually varying in its own quantity, can never be an 
accurate measure of the quantity of other things; so a commodity 

“Below, p. rgi. 

“ Ed. I reads “there.’ 


which is itself continually varying in its ow n va lue, can never be jin 
a ccurate measure of the value of othe r commoditi^. Ecjual quanti-'. 
ties ot labour, at ail times and placra, may be said to be ® of equal 
value to the labourer. In his ordinary state of health, strength and ■ 
spirits; in the ordinary degree of his skill and dexterity,® he must 
always lay down the same portion of his ease, his liberty, and his 
happiness. The price which he pays must always be the same, what- 
ever may be the quantity of goods which he receives in return for 
it. Of these, indeed, it may sometimes purchase a greater and some- 
times a smaller quantity; but it is their value which varies, not that 
of the labour which purchases them. At all times and places that is 
dear which it is difficult to come at, or which it costs much labour to 
acquire; and that cheap which is to be had easily, or with very little 
labour. Labour alone, therefore, never varying in its own value, is 
alone the ultimate and real standard by which the value of all com- 
modities can at all times *and places be estimated and compared. It 
i s their real pr icey their jaominal price only. 

But though equal quantities of labour are always of equal value 
to the labourer, yet to the person who employs him they appear 
sometimes to be of greater and sometimes ot smaller value. He pur- 
chases them sometimes with a greater and sometimes with a smaller 
quantity of goods, and to him the price of labour seems to vary like 
that of all other things. It appears to him dear in the one case, and 
cheap in the other. In reality, however, it is the goods which are 
cheap in the one case, and dear in the other. 

In this popular sense, therefore, labour, like commodities, may 
be said to have a real and a nominal price. Its real price may be said 
to consist in tlie quantity of the necessaries and conveniences of 
life which are given for it; its nominal price, in the quantity of 
money. The labourer is rich or poor, is well^or ill rewarded, in pro- 
portion t o the real, not to the nominal price of his labour. 

^I'he distinction between the real and the nominal price of com- 
modities and labour, is not a matter of mere speculation, but may 
sometimes be of considerable use in practice. The same real price js 
always of the same value; but on account of the variations in the 
value of gold and silver, the same nominal price is sometimes of 
very different values. When a landed estate, therefore, is sold with 
a reservation of a perpetual rent, if it is intended that this rent 
should always be of the same value, it is of importance to the faih- 
ily in whose favour itls reserved, that it should not consist in a par- 

' Ed. I reads “Equal quantities of labour must at all times and places be.” 

‘The words from “In his ordinary state of health” to “dexterity” appear 
first in ed. 2 . 


ticular sum of money Its value would in this case be liable to va- 
riations of two different kinds; first, to those wliich arise from the 
' different quantities of gold and silver which are contained at differ- 
ent times in coin of the same denomination ; and, secondly, to those 
which arise from the different values of equal quantities of gold and 
silver at different times. 

Princes and sovereign states have frequently fancied that they 
had a temporary interest to diminish the quantity of pure metal 
contained in their coins; but they seldom have fancied that they 
had any to augment it. The quantity of metal contained in the 
coins, I believe of all nations, has, accordingly, been almost contin- 
ually diminishing, and hardly ever augmenting.^* Such variations 
therefore tend almost always to diminish the value of a money 

The discovery of the mines of America diminished the value of 
gold and silver in Europe. This diminution, it is commonly sup- 
posed, though I apprehend without any certain proof, is still going 
on gradually,*® and is likely to continue to do so for a long time. 
Upon this supposition, therefore, such variations are more likely to 
diminish, than to augment the value of a money rent, even though 
it should be stipulated to be paid, not in such a quantity of coined 
money of such a denomination (in so many pounds sterling, for ex- 
ample), but in so many ounces either of pure silver, or of silver of a 
certain standard. 

The rents which have been reserved in corn have preserved their 
value much better than those which have been reserved in money, 
even where the denomination of the coin has not been altered. By 
the 1 8th of Elizabeth *® it was enacted, That a third of the rent of 
all college leases should be reserved in corn, to be paid, either in 

“ “Be above all things careful how you make any composition or agreement 
for any long space of years to receive a certain price of money for the com 
that is due to you, although for the present it may seem a tempting bargain.” 
— ^Fleetwood, Chronicon Preciosum, p. 174 

“Above, pp. 26-27. “Below, pp. 213-217. 

C. 6, which applies to O.vford, Cambridge, Winchester and Eton, and pro- 
vides that no college shall make any lease for lives or years of tithes, arable 
land or pasture without securing that at least one-third of “tholde” (presum- 
ably the whole not the old) rent should be paid in coin. The Act was pro- 
moted by Sir Thomas Smith to the astonishment, it is said, of his fellow-mem- 
bers of Parliament, who could not see what difference it would make. "But the 
khight took the advantage of the present cheapness ; knowing hereafter grain 
would grow dearer, mankind daily multiplying, and licence being lately given 
for transportation. So that at this day much emolument redoundeth to the 
colleges in each university, by the passing of this Act; and though their rents 
stand still, their revenues do increase.” — ^Fuller, Hist, of the University of 
Cambridge, 1633, p. 144, quoted in Strype, Life of the learned Sir Thomas 
Smith, 1698, p. 192 



kind, or according, to the current prices at the nearest public mar- 
ket. The money arising from this corn rent, though'originally but a 
third of the whole, is in the pfesent times, according to Doctor 
Blackstone, commonly near double of what arises from the other 
two-thirds.^* The old money rents of colleges must, according to 
this account, have sunk almost to a fourth part of their ancient 
value; or are worth little more than a fourth part of the corn which 
they were formerly worth. But since the reign of Philip and Mary 
the denomination of the English coin has undergone little or no al- 
teration, and the same number of pounds, shillings and pence have 
contained very nearly the same quantity of pure silver. This degra- 
dation, therefore, in the value of the money rents of colleges, has' 
arisen altogether from the degradation in the value of silver. 

When the degradation in the value of silver is combined with the 
diminution of the quantity of it contained in the coin of the same 
denomination, the loss is frequently still greater. In Scotland, where 
the denomination of the coin has undergone much greater altera- 
tions than it ever did in England, and in France, where it has under- 
gone still greacer than it ever did in Scotland,*® some ancient rents, 
originally of considerable value, have in this manner been reduced 
almost to nothing. 

^ Equal quantities of labour will at distant times be purchased 
more nearly with equal quantities of corn, the subsistence of the la- 
bourer, than with equal quantities of gold and silver, or perhaps of 
any other commodity ./Equal quantities of corn, therefore, will, at 
distant times, be more nearly of the same real value, or enable the 
possessor to purchase or command more nearly the same quantity 
of the labour of other people. They will do this, I say, more nearly 
than equal quantities of almost any other commodity; for even 
equal quantities of corn will not do it exactly. The subsistence of 
the labourer, or the real price of labour, as I shall endeavour to 
show hereafter,*® is very different upon different occasions; more 
liberal in a society advancing to opulence, than in one tbSt is stand- 
ing still ; and in one that is standing still, than in one that is going 
backwards. Every other commodity, however, will at any particu- 
lar time purchase a greater or smaller quantity of labour in propor- 
tion to the quantity of subsistence which it can purchase at that 
time. A rent therefore reserved in corn is liable only to the varia- 
tions in the quantity of labour which a certain quantity of com c^n 
purchase. But a rent reserved in any other commodity is liable, not 
only to the variations in the quantity of labour which any particular 

^ Commentaries, 176s, vol. ii., p. 332. 

“Above, p. 27. “Below, pp. 69-73. 

36 the wealth of NATIONS 


quantity of corn can purchase, but to the variations in the quantity 
of com which cin be purchased by any particular quantity of that 

Though the real value of a com rent, it is to be observed how- 
ever, varies much less from century to century than that of a money 
rent, it varies much more from year to year. The money price of la- 
bour, as I shall endeavour to show hereafter,” does not fluctuate 
from year to year with the money price of corn, but seems to be 
every where accommodated, not to the temporary or occasional, 
but to the average or ordinary price of that necessary of life. The 
average or ordinary price of corn again is regulated, as I shall like- 
tvise endeavour to show hereafter,^** by the value of silver, by the 
richness or barrenness of the mines which supply the market with 
that metal, or by the quantity of labour which must be employed, 
and consequently of corn which must be consumed, in order to 
bring any particular quantity of silver from the mine to the mar- 
ket. But the value of silver, though it sometimes varies greatly from 
century to century, seldom varies much from year to year, but fre- 
quently continues the same, or very nearly the same, for half a cen- 
tury or a century together. The ordinary or average money price of 
corn, therefore, may, during so long a period, continue the same or 
very nearly the same too, and along with it the money price of la- 
bour, provided, at least, the society continues, in other respects, in 
the same or nearly in the same condition. In the mean time the tem- 
porary and occasional price of corn may frequently be double, one 
year, of what it had been the year before, or fluctuate, for example, 
from five and twenty to fifty shillings the quarter.^® But when corn 
is at the latter price, not only the nominal, but the real value of a 
corn rent will be double of what it is when at the former, or will 
command double the quantity either of labour or of the greater part 
of other commodities; the money price of labour, and along with it 
that of most other things, continuing the same during all these fluc- 

Labour, therefore, it appears evidently, is the only universal, as 
well as the only accurate measure of value, or the only standard by 
which we can compare the values of different commodities at all 
times and at all places. We cannot estimate, it is allowed, the real 
value of different commodities from century to century by the 
quantities of silver which were given for them. We cannot estimate 
it from year to year by the quantities of corn. By the quantities of 
labour we can, with the greatest accuracy, estimate it both from 

” Belo\5r, pp. 74, 8s, 86. “ Below, chap, xi, see esp. p. 191. 

™ Ed. .t reads “it.” . “ Ed. i places the “for example” here. 


century to century and from year to year. From fentury to cfentury, 
corn is a better measure than silver, because from century to cen- 
tury, equal quantities of corn will command the same quantity of 
labour more nearly/than equal quantities of silver. From year to 
year, on the contrary, silver is a better measure than corn, because 
equal quantities of it will more nearly command the same quantity 
of labour.-^ 

But though in establishing perpetual rents, or even in letting very 
long leases, it may be of use to distinguish between real and nominal 
price; it is of none in buying and selling, the more common and or- 
dinary transactions of human life. 

At the same time and place the real and the nominal price of all 
commodities ’are exactly in proportion to one another. The more or 
less money you get for any commodity, in the London market, for 
example, the more or less labour it will at that time and place en- 
able you to purchase or command. 'At the same time and place, 
therefore, money is the exact measure of the real exchangeable 
value of all commodities. It is so, however, at the same time and 
place only. '. 

Though at distant places, there is no regular proportion between 
the real and the money price of commodities, yet the merchant who 
carries goods from the one to the other has nothing to consider but 
their money price, or the difference between the quantity of silver 
for which he buys them, and that for which he is likely to sell them. 
Half an ounce of silver at Canton in China may command a greater 
quantity both of labour and of the necessaries and conveniences of 
life, than an ounce at London. A commodity, therefore, which sells 
for half an ounce of silver at Canton may there be really dearer, of 

“ “In England and this part of the world, wheat being the constant and 
most general food, not altering with the fashion, not growing by chance: but 
as the farmers sow more or less of it, which they endeavour to proportion, as 
near as can be guessed to the consumption, abstracting the overplus of the 
precedent year in their provision for the next ; and vice verm, it must needs 
fall out that it keeps the nearest proportion to its consumption (which is more 
studied and designed in this than other commodities) of any thing", if you take 
it for seven or twenty years together: though perhaps the scarcity of one year, 
caused by the accidents of the season, may very much vary it from the im- 
mediately precedent or following. Wheat, therefore, in this part of the world 
(and that grain which is the constant general food of any other country) is 
the fittest measure to judge of the altered value of things in any long tract of 
time: and therefore wheat here, rice in Turkey, etc., is the fittest thing to re- 
serve a rent in, which is designed to be constantly the same for all fufure 
ages. But money is the best measure of the altered value of things in a few 
years: because its vent is the same and its quantity alters slowly. But wheat, 
or any other grain, cannot serve instead of money: because of its bulkiness 
and too quick change of its quantity.” — Locke, Some Consideratwns of the 
Consequences of the Lowering of Interest and Raising the Value^ Money, 
ed. of 1696, pp.’74, 7S. 

38 the wealth of NATIONS 

mure real importai^ce to the man who possesses it there, than a com- 
modity which sells for an ounce at London is to tte man who pos- 
•sess'es it At London. If a London merchant, however, can buy at 
Canton for half an ounce ol silver, a commodity which he can after- 
wards sell at London for £m ounce, he gains a hundred per cent, by 
the bargain, just as much as if an ounce of silver was at London ex- 
actly of the same value as at Canton. It is of no importance to him 
that half an ounce of silver at Canton would have given him the 
command of more labour and of a greater quantity of the neces- 
saries and conveniencies of life than an ounce can do at London. An 
ounce at London will always give him the command of double the 
quantity of all these, which half an ounce could have done there, 

I and this is precisely what he wants. 

As it is the nominal or money price of goods, therefore, which 
finally determines the prudence or imprudence of all purchases and 
sales, and thereby regulates almost the whole business of common 
life in which price is concerned, we cannot wonder that it should 
have been so much more attended to than the real price. 

In such a work as this, however, it may sometimes be of use to 
compare the different real values of a particular commodity at dif- 
ferent times and places, or the different degrees of power over the 
labour of other people which it may, upon different occasions, have 
given to those who possessed it. We must in this case compare, not 
so much the different quantities of silver for which it was commonly 
sold, as the different quantities of labour which those different 
quantities of silver could have purchased. But the current prices of 
labour at distant times and places can scarce ever be known with 
any degree of exactness. Those of corn, though they have in few 
places been regularly recorded, are in general better known and 
have been more frequently taken notice of by historians and other 
writers. We must generally, therefore, content ourselves with them, 
not as being always exactly in the same proportion as the current 
prices of labour, but as being the nearest approximation which can 
commonly be had to that proportion. I shall hereafter have occasion 
to make several comparisons of this kind.*® 

In the progress of industry, commercial nations have found IT 
convenient to coin several different metals into money; gold foi 
larger payments, silver for purchases of moderate value, and cop- 
per, or some other coarse metal, for those of still smaller consider^ 
tion. They have always, however, considered one of those metals Ss 
more peculiarly the measure of value than any of the other two ; and 

® Ed I reads “than one which sells for an ounce at London to.” 

” BeloWt chaD. xi. itassim. 



this preference seems generally to have been jgiven to thp metal 
which they happened first to make use of as the instrument of .com- 
merce. Having once begun to use as their standard, wljich'they 
must have done when they had no other money, they have generally 
continued to do so even when the necesHty was not the same. 

The Romans are said to have had nothing but copper money till 
within five years before the first Punic war,-^ when they first began 
to coin silver. Copper, therefore, appears to have continued always 
the measure of value in that republic. At Rome all accounts appear 
to have been kept, and the value of all estates to have been comput- 
ed, either in Asses or in Sestertii. The yfi was always the denomina- 
tion of a copper coin. The word Sestertius signifies two Asses and a 
half. Though the Sestertius, therefore, was originally®® a silver 
coin, its value was estimated in copper. At Rome, one who owed a 
great deal of money, was said to have a great deal of othCr people’s 

The northern nations who established themselves upon the ruins 
of the Roman empire, seem to have had silver money from the first 
beginning of their settlements, and not to have known either gold or 
copper coins for several ages thereafter. There were silver coins in 
England in the time of the Saxons; but there was little gold coined 
till the time of Edward III. nor any copper till that of James I. of 
Great Britain. In England, therefore, and for the same reason, I be- 
lieve, in all other modern nations of Europe, all accounts are kept, 
and the value of all goods and of all estates is generally computed 
in silver; and when we mean to express the amount of a person’s 
fortune, we seldom mention the number of guineas, but the number 
of pounds sterling ®'^ which we suppose would be given for it. 

Originally, in all countries, I believe, a legal tender of payment 

( could ®® be made only in the coin of that metal,®® which was pecu- 
liarly considered as the standard or measure of value. In England, 
gold was not considered as a legal tender for a long time after it was 
coined into money. The proportion between the values of gold and 
silver money was not fixed by any public law or proclamation; but 
was left to be settled by the market. If a debtor offered payment in 
gold, the creditor might either reject such payment altogether, or 
1 accept of it at such a valuation of the gold as he and his debtor 
could agree upon. Copper is not a^ present a legal tender, except in 
the change of the smaller silver coins. In this state of things the'dis- 

Pliny, lib. xxxiii. c. 3. This note is not in ed. 1. 

” Eds. I and 2 read “always.” ” Habere aes alienum. 

” Ed. I does not contain “sterling.” ® Ed. i places the “originally” here. 
“ Ed. I places the “only” here. 


tinction between tl^ metal which was the standard^ and that which 
was not the standard, was something more than a nominal distinc- 

In process of time, and as people became gradually more familiar 
with the use of the different metals in coin, and consequently better 
acquainted with the proportion between their respective values, it 
has in most countries, I believe, been found convenient to ascertain 
this proportion, and to declare by a public law that a guinea, for 
example, of such a weight and fineness, should exchange for one- 
and-twenty shillings, or be a legal tender lor a debt of that 
amount,'’^ In this state of things, and during the continuance of any 
one regulated proportion of this kind, the distinction between the 
metal which is the standard, and that which is not the standard, be- 
comes little more than a nominal distinction.^- 

In consequence of any change, however, in this regulated propor- 
tion, this distinction becomes, or at least seems to become, some- 
thing more than nominal again. If the regulated value of a guinea, 
for example, was either reduced to twenty, or raised to two-ancl- 
twenty shillings, all accounts being kept and almost all obligations 
for debt being expressed in silver money, the greater part of pay- 
ments could in either case be made with the same quantity of silver 
money as before ; but would require very different quantities of gold 
money; a greater in the one case, and a .smaller in the other. Silver 
would appear to be more invariable in its value than gold. Silver 
would appear to measure the value of gold, and gold would not ap- 
pear to measure the value of silver. The value of gold would seem to 
depend upon the quantity of silver which it would exchange for : 
and the value of silver would not seem to depend upon the quantity 
of gold which it would exchange for. This difference, however, 
would be altogether owing to the custom of keeping accounts, and 
of expressing the amount of all great and small sums rather in silver 

“The Act, 19 Hen. VII., c. 5, ordered that certain Boldi'Coins should pass 
for the sums for which they were coined, and s and 6 Ed. VI. prescribed pen- 
alties for giving or taking more than was warranted 1 )> proclamation. The 
value of the guinea was supposed to be fixed by the procl.tmation of 1717, for 
which see Economic Journal, March, 1898. Lead tokens were coined by indi- 
viduals in the reign of Elizabeth. James I. coined copper farthing tokens, but 
abstained from proclaiming them as money of that value. In 1672 copper half- 
pennies were issued, and both halfpeimics and farthings were ordcr^ to pass 
as money of those values in all payments under sixpence. — Harris, fioney and 
Coins, pt. i , § 39; Liverpool, Treatise on the Coins of the Rtaiin, 180S, pp. 
130, 131. 

^ Ed I reads “sum." 

f , if 21 pounds may be paid with 420 silver shillings or with gold guin- 
matter whether a “pound” properly signifies 20 silver shillings 
or 1 ? of a gold guinea. 


r'eal and nominal price 

than in gold mpncy. One of Mr. Drummond'siiiotes for five-and- 
twenty or fift}' guineas would, after aji alteration of this kind, be 
still payable with five-and-tw enty or fifty guineas in the same man- 
ner as before. It would, after such an alteration, be paN'able with the 
same quantity of gold as before, but with verj' different quantities 
of silver. In the payment of .such a note, gold would appear to be 
more invariable in its value than silver, (lold would appear to meas- 
ure the value of silver, and silver would not appear to measure the 
value of gold. If the custom of keeping accounts, and of expressing 
promissory notes and other obligations for money in this manner, 
should e^'er become general, gold, and not silver, would be consid- 
ered as the metal which was pteculiarly the standard or measure of 

In reality, during the continuance of any one regulated propor- 
tion, between the respective values of the different metals in coin, 
the value of the most precious metal regulates the value of the 
whole coin.''*'’’ Twelve copper pence contain half a pound, avoirdu- 
pois, of copper, of not the best quality, which, before it is coined, is 
seldom worth seven-pence in silver. But as by the regulation twelve 
such pence are ordered to exchange for a shilling, they are in the 
market considered as worth a shilling, and a shilling can at any time 
be had for them. Even before the late reformation of the gold coin 
of Great Britain.-’ ' the gold, that part of it at least which circulated 
in London and its neighbourhood, was in general less degraded be- 
low its standard weight than the greater part of the silver. One-and- 
twent}’- worn and defaced shillings, however, were considered as 
equivalent to a guinea, which perhaps, indeed, was worn and de- 
faced too, but seldom so much so. The late regulations*’’ have 
brought the gold coin as near perhaps to its standard weight as it is 
possible to bring the current coin of any nation: and the order, to 
receive no gold at the public offices but by weight, is likely to pre- 
serve it so. as long as that order is enforced. The silver coin still con- 
tinues in the same u orn and degraded state as before the reforma- 
tion of the gold coin. In the market, however, one-and-twenty shill- 
ings of this degraded silver coin are still considered as worth a 
guinea of this excellent gold coin. 

” This happens to have been usually, though not always, true, but it is so 
simply because it has usually happened that the most precious metal in use as 
money has been made or become the standard. Gold was already the standard 
in England, though the fact was not generally recognised ; see Harris, Money 
and Coins, pt. ii., §§ 36, 37, and below, pp. 519-322. 

“In 1774. 

These regulations, issued in 1774, provided that guineas should not pass 
when they had lost a certain portion of their weight, varying with their age. — 
Liverpool, Coins of the Realm, p. 216, note. 

4 -’ 


The reformation the gold coin has evidently raised the value of 
the silver coin which can be exchanged for it. 

• In the English mint a pound weight of gold is coineil into forty- 
four guineas and a half, which, at one-and-twenty .shillings the 
guinea, is equal to forty-six pound.s fourteen .shillings and six-pence. 
An ounce of such gold coin, therefore, is worth 3 /. 17 s. loi d. in sil- 
ver. In England no duty or seignorage is paid upon the coinage, and 
he who carries a pound weight or an ounce weight of standaul gold 
bullion to the mint, gets back a pound weight or an ounce weight of 
gold in coin, without any deduction. Three pounrls seventeen shill- 
ings and ten-pence halfpenny an ounce, therefore, is .said to be the 
mint price of gold in England, or the quantity of gold coin which 
the mint gives in return for .standard gold bullion. 

Before the reformation of the gold coin, the price of standard 
gold bullion in the market had for many years been upwauls of 3 /. 
18 i. sometimes 3 ?. ig s. and very freriuently 4 /. an ounce; that 
sum, it is probable, in the worn and degnuled gold coin, .seldom t on- 
taining more than an ounce of standard gold. Since the reformation 
of the gold coin, the market price of standard gold bullion seldom 
exceeds 3 /. 17 j. 7 d. an ounce. Before the reformation of the gold 
coin, the market price was always more or less above the mint price. 
Since that reformation, the market price has been con.stantly ladow 
the mint price. But that maikct pi ice is the same w'hether it is |)aid 
in gold or in silver coin. The late reformation of the gold coin, theie- 
fore, has rai.sed not only the value of the gold coin, Imt likewise that 
of the silver coin in proportion to gold Indlion, and probably too in 
proportion to all other commodities; though the price of the greater 
part of other commodities being inllucnced liy so many other 
causes, the rise in the value cither of gold or silver coin in propor- 
tion to them, may not be so distinct and .sensible. 

In the English mint a pound weight of standard silver l)ullion is 
coined into sixty-two shillings, containing, in the same manner, a 
pound weight of standard .silver. Five shillings and two-iience an 
ounce, therefore, is said to be the mint price of silver in I'higland, or 
the quantity of silver coin which the mint gives in return for stan- 
dard silver bullion. Before the reformation of the gold coin, the 
market price of standard silver bullion was, upon different occa- 
sions, five shillings and four-pence, five shillings and five-pence, five 
shillings and six-pence, five shillings and sevcn-iience, and very 
often five shillings and eight-pence an ounce. Five shillings and 
seven-pence, however, seems to have been the most common price. 
Since the reformation of the gold coin, the market price of standard 
silver bullion has fallen occasionally to five shillings and three- 


pence, five shillings and four-pence, and five sh^ngsand five-pence 
an ounce, whit^ last price it has scarce ever exceeded. Though the 
market price oi silver bullion has fallen cciisjtdeiably since ihe re- 
formation of the gold coin, ii hasnoc fallen, so low as the mint price. 

In the propuru'o.n between the difiertiiL metaU in lb,- English 
coin, as copper is rated very much above its real wilue, sa silver is 
rated somewhat below it. In the maiket of Europe, in the French 
coin and in the Dutch coin, on oume of fine gold e.xchanges for 
about fourteen ounces of fine siUet. In the FnglLsh coin, it ex- 
changes for about fifttvn ounces, that is, for more silver than n is 
worth acemdiug to the common e.stim.uion cf Euroixs.*® 15111 as, the 
price of copper in bar.s i- not, even in England, rai.sed by the high 
price of copper in English coin, so the price ot silver in bullion is 
not Muik by the low rate of silver m Knglish coin. Silver in bnUion 
still preserve.s ir,- propt'r proportion to gold; for the same reason 
that copper in bars preseives its pro{ver proportion to silver.®’^ 

Upoir the reiormatirm of the silver coiivin the reigtv of ^YiUia^n 
HI. the price of silver bullion still continired to be sonrewhat above 
the mint price. Mr. Locke imputed this high price to the permis- 
sion of exporting silver bullion, and to the prrihibitiorr of expoiting 
silver coin.®** 'I'his permission of evjrorting, he .said, rondeted the 
demand for silver bullion greater than the demand for .silver coin. 
But the number of people who want silver coin for the common 
uses of buying and selling at home, is srrrely much greater than that 
of those who w’ant .diver bullion either for the use of rxxportation or 
for ,my other use. There subsists at pie.sent a like permission of ex- 
porting "old bullion, and a like prohibition of exporting gold roin; 
and yet the price of jtold bullion has f.alK‘n below the mint price. 
But in the Eirglish coin silver then, in the same manner as now, 
undei-r.tied in propoirion to golil; and the gold coin twhr'r h at that 
time tix> not -.upposed tx> leqnire ;rny reformation') regrrlated 
then, as well .is now, the le.d value of the whole coin. ,\s the reform- 
ation of the >ili'eT coin did not then reduce the pi ice of .silvei bnl- 

“"M.ueiis, I /tn'frml .Ucfi/re'U, «l lim.liv, 171.,, pi'. 5,r-S.s. aivc.. Dir pio- 
portiims thus Fii-nch coin. 1 in i.| Dutch, r to iiiVifM hirgUsh, r to 

'■Full weigh) ijlvcr coins would not iciitiin In lucul.ition, fis tlic bullion in 
them v\ as Worth more reckoned in Ruincas and in the ordinary old and worn 
silver coins the nominal iimounl starapcil on thi m. 

“'Locke, Furthet Ct'iisiilertilinns I'omi'niinji Jiuning the Value of Afoney, 
and ed„ toijs, pp, sS-6o. The pvporlation of foreign coin (misprinted “kind” 
in Pickering) or bullion of gold or silver was iiermittcd by 15 Car. 1 I„ c, 7, on 
the ground that it was “found by experience that” money and bullion were 
'•carried in greatest abundance (as to a common market) to such places aagivc 
free liberty for exporting the same” and in order “the better to keep in and 
increase the current coins” of the kingdom. 


lion to the mint pricje, it is not very probable that a Ijke reformation 

will do so now. 

• Were the silver coin brought back as near to its standard weight 
as the gold, a guinea, it is probable, would, according to the present 
proportion, exchange for more silver in coin than it would purchase 
in bullion. The silver coin containing its full standard weight, there 
would in this case be a profit in melting it down, in order, first, to 
sell the bullion for gold coin, and afterwards to e.xchange this gold 
coin for silver coin to be melted down in the same manner. Some 
alteration in the present proportion seems to be the only method of 
preventing this inconveniency. 

The inconveniency perhaps would be less if silver was rated in 
the coin as much above its proper proportion to gold as it is at pres- 
ent rated below it ; provided it was at the same time enacted that 
silver should not be a legal tender for more than the change of a 
guinea; in the same manner as copper is not a legal tender for more 
than the change of a shilling. No creditor could in this case be 
cheated in consequence of the high valuation of silver in coin ; as no 
creditor can at present be cheated in consequence of the high valu- 
ation of copper. The bankers only w'ould suffer by this regulation. 
WTien a run comes upon them they sometimes endeavour to gain 
time by paying in six-pences, and they would be precluded by this 
regulation from this discreditable method of evading immediate 
payment. They would be obliged in consequence to keep at all 
times in their coffers a greater quantity of cash than at present; 
and though this might no doubt be a considerable inconveniency to 
them, it would at the same time be a considerable security to their 

Three pounds seventeen shillings and ten-pence halfpenny (the 
mint price of gold) certainly does not contain, even in our present 
excellent gold coin, more than an ounce of standard gold, and it 
may be thought, therefore, should not purchase more standard bul- 
lion. But gold in coin is more convenient than gold in bullion, and 
though, in England, the coinage is free, yet the gold which is car- 
ried in bullion to the mint, can seldom be returned in coin to the 
owner till after a delay of several weeks. In the present hurry of the 
mint, it could not be returned till after a delay of several months. 
This delay is equivalent to a small duty, and renders gold in coin 
somewhat more valuable than an equal quantity of gold in bul- 

“ Harris, writing nearly twenty years earlier, had said, “it would be a ri- 
diculous and vain attempt to make a standard integer of gold, whose parts 
should be silver ; or to make a motley standard, part gold and part silver.’* — 
Money and Coins, pt. i., § 36. 


lion.’" I f in the English coin silver was rated acfording to its proper 
prnpordon to gold, the price of silver bullion would probably fall 
below the mint price even without any reformation of the silver 
coin: Ih.^ value even of the present worn and defaced silver coin be- 
ing regulaied hi’ the value of the excellent gold coin for which it 
can be changed. 

A small seignorage or duty upon the coinage of both gold and sil- 
ver would probably increase still more the superiority of those 
metals in coin above an equal quantity of either of them in bullion. 
The coinage would in this case increase the value of the metal 
coined in proportion to the extent of this small duty ; for the same 
reason that the fashion increases the value of plate in proportion to 
the price of that fashion. The superiority of coin above bullion 
would prevent the melting down of the coin, and would discourage 
its exportation. If upon any public exigency ^it should become 
necessary to export the coin, the greater part of it would soon re- 
turn again of its own accord. Abroad it could sell only for its 
weight in bullion. At home it would buy more than that weight. 
There would be a profit, therefore, in bringing it home again. In 
France a seignorage of about eight per cent, is imposed upon the 
coinage,^^ and the French coin, when exported, is said to return 
home again of its own accord 

The occcisional fluctuations in the market price of gold and sil- 
ver bullion arise from the same causes as the like fluctuations in 
that of all other commodities. The frequent loss of those metals 
from various accidents by sea and by land, the continual waste of 
them in gilding and plating, in lace and embroidery, in the wear 
and tear of coin, and in that of plate require, in all countries 
which possess no mines of their own, a continual importation, in 
order to repair this loss and this waste. The merchant importers, 
like all other merchants, we may believe, endeavour, as well as they 
can, to suit their occasional importations to what, they judge, is 
likely to be the.immediate demand. With all their attention, how- 
ever, they sometimes over-do the business, and sometimes under- 
do it. When they import more bullion than is wanted, rather than 
incur the risk and trouble of exporting it again, they are some- 

an ounce of standard gold would not actually fetch £3 17s. lo^d. if 
sold for cash down. 

This erroneous statement is repeated below, pp. 445, and on p. 518, where 
the calculations on which it is based are given. See the note on that passage. 

** The question of seignorage is further discussed at some length in the dbap- 
ter on Commercial Treaties, pp. 516-522. 

" Ed. I reads “in the tear and wear of coin, and in the tear and wear of 


times willing to sell,a part of it for something less than the ordin- 
ary or average price. When, on the other hand, they import less 
than is wanted, they get something more than this price. But when, 
under all Ihose occasional fluctuations, the market price either of 
gold or silver bullion continues for several years together steadily 
and constantly, either more or less above, or more or less below the 
mint price: we may be assured that this steady and constant, 
either superiority or inferiority of price, is the effect of something 
in the state of the coin, which, at that time, renders a certain quant- 
ity of coin either of more value or of less value than the precise 
quantity of bullion which it ought to contain. The constancy and 
steadiness of the effect, supposes a proportionable constancy and 
steadiness in the cause. 

The money of any particular country is, at any particular time 
and place, more or less an accurate measure of value according ns 
the current coin is more or lcs.s exactly agreeable to its standard, or 
contains more or less exactly the precise quantity of pure gold or 
pure silver which it ought to contain. If in England, for e.xamtde. 
forty-four guineas and a half contained exactly a pound weight ol 
standard gold, or eleven ounces of fine gold and one ounce of alloy, 
the gold coin of England would be as accurate a measure of the 
actual value of goods at any particular time and place as the na- 
ture of the thing would admit. But if, by rubbing and wearing, 
forty-four guineas and a half generally contain less than a pound 
weight of standard gold; the diminution, however, being greater in 
some pieces than in others: the measure of value comes to be liable 
to the same sort of uncertainty to which all other weights and 
measures are commonly exposed. As it rarely happen.s that these 
are exactly agreeable to their standard, the merchant adjusts the 
price of his goods, as well as he can, not to what those weights and 
measures ought to be, but to what, upon an average, he find.s by 
experience they actually are. In consequence of a like di.sordcr in 
the coin, the price of goods comes, in the same manner, to lie ad- 
justed, not to the quantity of pure gold or silver whicli the coin 
ought to contain, but to that which, upon an average, it is found 
by experience it actually does contain. 

By the money-price of goods, it is to be observed, I understand 
always the quantity of pure gold or silver for which they are sold, 
without any regard to the denomination of the coin. Six shillings 
and eight-pence, for example, in the time of Edward I., I consider 
as the same money-price with a pound sterling in the present 
times; because it contained, as nearly as we can judge, the same 
quantity of pure silver. 



In that early and rude slate of society which precedes both the 
accumulation of stock and the appropriation of land, the propo^ 
tion between the quantities of labour necessary h'f iicquirinjt clif* 
feivnt objects seems ti' he the only circumstance which can afford 
any rule for eu'hansina: them for one another,* If nmong a nation 
of hunters, for example, it usually costs twice the lalumr to kill a 
beaver which it does to kill a deer, (ure luMver should naturally ex- 
change for or be worth two deer. It is mitural that what is usually 
the produce of two days or two hours labour, should be worth 
double of what is usually the produce of one day's or one hour's 

If the one species of laliour should be more severe than the 
other, some, allowance will natumlly be made for this superior 
hardship; and the produce of one hour’.s labour in the one way mtiy 
frequently exchange for that of two hours labour in the other. 

Or if the one species of labour retjuires an uncommon ch'gvec of 
dexterity and ingenuity, the esteem which men have for .such tal- 
ents, will naturally give a value to their produce, superior to what 
would he due to the time employed about it. Such talents can sel- 
dom be aciniired hut in consequence of long application, and the 
superior value of their produce ni.\y freiiuenlly he no more than a 
rea-fionablc compensation for the time and labour which must be 
spent in acquiring them. In the advanced state of society, allow- 
ances of this kind, for .superior hardship and superior skill, are 
commonly made in the wages of labour; and something of the same 
kind must probably have taken place in its earliest and rudest 

In this state of things, the whole produce of labour belongs to 
the labourer; and ^ the quantity of labour commonly employed in 
acquiring or producing any commodity, is the only circumstance 

^ Ed. I docs not contain “the whole produce of labour belongs to the la- 
bourer ; and.” The words, however, occur In all eds. at p. 64 below. 


48 the wealth of NATIONS 

which can regulate the quantity of labour which it ought commonly 
to purchase, command, or exchange for. ‘ 

. As soon as stock has accumulated in the hands of particular per- 
sons, some of them will naturally employ it in setting to work in 
dustrious people, whom they will supply with material.) and sub- 
sistence, in order to make a profit by the sale of their work, or by 
what their labour adds to the value of the materials. In exchanginj 
the complete manufacture either for money, for labour, or for othei 
goods, over and above what may be sufficient to pay the price of 
the materials, and the wages of the workmen, something must be 
given for the profits of the undertaker of the work who hazards his 
stock in this adventure. The value which the workmen add to the 
materials, therefore, resolves itself in this case into two parts, of 
which the one paj's their si ages, the other the profits of their em- 
ployer upon the whole stock of materials and wages which he ad- 
vanced. He could ‘have no interest to employ them, unless he ex- 
pected from the sale of their work something more than what was 
sufficient to replace his stock to him; and he could have no interest 
to employ a great stock rather than a small one, unless his profits 
were to bear some proportion to the extent of his stock. 

The profits of stock, it may perhaps be thought, are only a dif- 
ferent name for the wages of a particular sort of labour, the labour 
of inspection and direction. They are, however, altogether differ- 
ent, are regulated by quite sufficient principles, and bear no pro- 
portion to the quantity, the hardship, or the ingenuity of this sup- 
iposed labour of inspection and direction. They are regulated 
altogether by the v alue of th e jtock ^iployed, -TriiJ .-ip gr^.-itpr or 
smaller in proportio n. to 4ii£.ex{ent of this §tock. Let us siqipose, 
for example, that in some particular place, where the common 
annual profits of manufacturing stock are ten per cent, there are 
two different manufactures, in each of which twenty workmen are 
employed at the rate of fifteen pounds a year each, or at the ex- 
pence of three hundred a year in each manufactory. Let us suppose 
too, that the coarse materials annually wrought up' in the one cost 
only seven hundred pounds, while ihe finer materials in the other 
cost seven thousand. The capital annually employed - in the one 
will in this case amount only to one thousand pounds; whereas 
that employed in the other will amount to seven thousand three 
hundred pounds. At the rate of ten per cent, therefore, the under- 
taker of the one will expect an yearly profit of about one hundred 
pounds only; while that of the other will expect about seven hun- 

The capital annually employed” is the working expenses for twelve 
months, not the capital in the usual modern sense. 


dred and thirty pounds. But though their profhs are .so very differ- 
ent, their labdtir of inspection and direction may be either alto- 
gether or very nearly the same. In many great works, almost the 
whole labour of this kind is ® committed to some principal clerk. 
His wages properly express the value of this labour of inspection 
and direction. Though in settling them some regard is had com- 
monly, not only to his labour and skill, but to the trust which is 
reposed in him, yet they never bear any regular proportion to the 
capital of which he oversees the management; and the owner of 
this capital, though he is thus discharged of almost all labour, still 
expects that his profits should bear a regular proportion to his 
capital.'* In the price of commodities, therefore, the profits of stock 
constitute a component part ® altogether different from the wages 
of labour, and regulated by quite different principles. 

In this state of things, the whole produce of labour does “not al- 
ways belong to the labourer. He must in most cases share it with 
the owner of the stock which employs him. Neither is the quantity 
of labour commonly employed in acquiring or producing any com- 
modity, the only circumstance ® which can regulate the quantity 
which it ought commonly to purchase, command, or exchange for. 
An additional quantity, it is evident, must be due for the profits of 
the stock which advanced the wages and furnished the materials of 
that labour. 

As soon as the land of any country has all become private prop- 
erty, the landlords, like all other men, love to reap where they 
never sowed," and demand a rent even for its natural produce. The 
wood of the forest, the grass of the field, and all the natural fruits 
of the earth, which, when land was in common, cost the labourer 
only the trouble of gathering them, come, even to him,® to have an 
additional price fi.xed upon them. He must give up to the landlord 
a portion of what his labour either collects or produces. This por- 
tion, or, ^\hat comes to the same thing, the price of this portion, 
constitutes the/ent of land, and in the price of the greater part of 
commodities makes a third component part.® 

■■Ed. I insert'! ‘'frequently.” *Eds. i .ind 2 read “proportion to it." 

“ Ed. I reads “profit.s of slock are a source of value." 

“Ed. I reads from the bepinning of the paragraph: “In this state of things, 
therelore, the quantity of labour commonly employed in acquiring or produc- 
ing any commodity is by no means the only circumstance.” 

'Buchanan, ed. Wealth of Nations, 1814, vol. i., p. 80, says. “They do so. 
But the question is why this apparently unreasonable demand is so generally 
complied with. Other men love also to reap where they never sowed, but the 
landlords alone, it would appear, succeed in so desirable an object.” 

“ Ed. I does not contain “the labourer” and “even to him,” 

°Ed. I in place of these two sentences reads: “Men must then pay for the 
licence to gather them ; and in exchanging them either for money, for labour, 


The real value of all the different component parts of price, it 
must be observed, is measured by the quantity labour which 
they C2tn, each of them, purchase or command. Labour measures 
the value not only of that part of price which resolves itself into 
labour, but of that which resolves itself into rent, and of that which 
"resolves itselfiinto profit. 

In every society the price of every commodity finally resolves it- 
self into some one or other, or all of those three parts; and in every 
improved society, all the three enter more or less, as compone^ 
parts, into the price of th e, far greater part of conimodities.'^i^^.. 

In the price of corn, for exampK,'^6ne^aH'tJliys"^Ke'^eht of the 
landlord, another pays the wages or maintenance of the labourers 
and labouring cattle emploj-ed in producing it, and the third 
pays the profit of the farmer. These three parts seem either im- 
mediately or ultimately to make u p the_TWigle_ 2 rice of corn. A 
fourth part, i t maV pe rhaps, be thought, is necess^y for rcplacim; 
the stock of the far me r, or for cgnipen^ting the .wear and tear of 
his lahnur ine rattle, .and other instruments of^ husbaiidrv. But it 
must be considered that the price of any instrument of husbandry, 
such as a labouring horse, is itself made up of the same thiee parts; 
the rent of the land upon which he is reared, the labour of tending 
and rearing him, and the profits of the farmer who advances both 
the rent of this land, and the wages of this labour. Though llie 
price of the corn, therefore, may pay the price as well as the main- 
tenance of the horse, the whole price still resolves itself either im- 
mediately or ultimately into the same three parts of rent, labour,'"' 
and profit. 

or for other goods, over and above what is due, both for the labour of g.ith- 
cring them, and for the profits of the stock which employs th.nt liibour. some 
allowance must be made for the piicc of the licence, which constitutes the flist 
rent of land. In the price therefore of the greater part of commodities the rent 
of land comes in this manner to constitute a third source of value. In this st.itc 
of things, neither the quantity of labour commonly employed in acquiring or 
producing any commodity, nor the profits of the stock which advanced the 
wages and furnished the materials of that labour, arc the only circumstance.s 
which can regulate the quantity of labour which it ought commonly to pur- 
diasc, command or exchange for. A third circumstance must likewise be taken 
into consideration; the rent of the land; and the commodity must commonij 
purchase, command or exchange for, an additional quantity of labour, in ordci 
to^enable the person who brings it to market to pay tliis rent.” 

. \ ^ reads “The real value of all the different component parts of price 

IS m this manner measured.” 

_ “ Smith overlooks the fact that his inclusion of the maintenance of labour- 
mg cattle here as a sort of wages requires him to include it in the national in- 
come or “wealth of the nation,” and therefore to reckon the cattle themselves 
as part of the nation. 

“Ed. I reads “tear and wear.” 

The use of “labour” instead of the more natural “wages” here is more 


In the price of flour or meal, we must adfl^io the price of the 
com. the profits of the miller, and the vvage.s of his sci vants; in the 
price of bread, the profits of the baker, and the wage.s of his seru- 
ants; and in the price of both, the labo'..r of ir.msportini, the com 
from the house of the farmer to that of the miller, and from of 
the miller to that of the baker, together witli the pjroiits ol those 
who advance the wages of that labour. 

The price of flax resolvc.s itself into the same three parts as that 
of corn. In the price of linen we must add to this price the wages of 
the flax-dresser, of the spinner, of the weaver, of the bleacher, &c. 
together with the profits of their re.speciive employers. V]A 
As any p.irticular co:nnioi.l!t\- comes to be more luaniWaciured, 
that part of the pi ice which!vcs itself into wages and profit, 
comes to be greater in proportion to that which resolves itself into 
rent. Tn the progress of the manufacture, not only the number of 
profits increase, but eveiy subsequent piofit is greater than the 
foregoing; because the capital from which it is derived ntust always 
be greater. The capital which employs the weavers, for example, 
must be greater than that which employs the spinners; because it 
not only replaces that capital with its profits, but pays, besitles, the 
wages of the wcaveis; and the profits must always bear some pro- 
portion to the capital.’'* 

In the most improved .societies, however, there are alwaj’S a tew 
commodities of which the price re.solvcs itself into two parts only, 
the wages of labour, and the profits of stock; and a .still smaller 
number, in which it consists altogether in the wages of labour. In 
tlie price of sea-fish, for example, one part pays the labour of the 
fishermen, and the other the profits of the capital employed in the 
fishery. Rent very seldom makes any part of it, though it does 
sometimes, as I shall shew hereafter.*'’ It is otherwise, at least 
through the greater part of Europe, in river fisheries. A salmon 
fishery pays a rent, and rent, though it cannot well be called the 
rent of land, make.s a part of the price of a salmon as well as wages 
and profit. In some parts of Scotland a few poor people m.ike a 
trade of gathering, along the sea-shore, those little variegated 
stones commonly known by the name of Scotch Pebbles. The price 

probably the result at its use five lines higher up than of any feeling of diffi- 
culty about the maintenance of cattle. On p. S6 below “rent, labour and prof- 
it" and “rent, wages and profit" are both used; see below, p. 316, and note. 

** The fact that the later manufacturer has to replace what is here called the 
capital, i.e., the periodical expenditure of the earlier manufacturer, docs not 
necessarily require him to have a greater capital to deal with the same prod- 
uce. It need not be greater if he requires less machinery and buildings and a 
smaller stock of materials, 

“ Below, p. 14S. 



which is paid to th§n by the stone-cutter is altogether the wages of 
their labour; neither rent nor profit make any part of it. 

, But the whole pi^ of any commodity must still finally resolve 
itself into some one ^ other, or all of those three parts ; as whatever 
part of jt remains after paying the rent of the land, and the price 
of the whole labour employed in raising, manufacturing, and bring- 
ing it to marrat, must necessarily be profit to somebody,’*® 

As the price or exchangeable value of every particular commod- 
ity, taken separately, resolves itself into some one or other, or all of 
those three parts; so that of all the commodities which compose 
the whole annual produce of the labour of every country, taken 
complexly, must resolve itself into the same three parts, and be 
parcelled out among different inhabitants of the country, either as 
the wages of their labour, the profits of their stock, or the rent of 
their land.’’ The whole of what is annually either collected or pro- 
duced by the labour of every society, or what comes to the same 
thing, the whole price of it, is in this manner originally distributed 
among some of its different members Wages, profit, and rent, are 
the three original sources of all revenue as well as of all exchange- 
able value. All other revenue is ultimately derived from some 
one or other of these. 

A\Tioever derives his revenue from a fund which is his own, must, 
draw it either from his labour, from his stock, or from his land. 
The revenue derived from labour is called wages. That derived 
from stock, by the person who manages or employs it, is called 
profit. That derived from it by the person who docs not employ it 
himself, but lends it to another, is called the interest or the use of 
money. It is the compensation which the borrower pays to the 
lender, for the profit which he has an opportunity of making by 
the use of the money. Part of that profit naturally belongs to the 
borrower, who runs the risk and takes the trouble of employing 
it; and part to the lender, who affords him the opportunity of mak- 
ing this profit. The interest of money is always a .derival ive rev- 
enue, which, if it is not paid from the profit which is made by the 
use of the money, must be paid from some other source of rev- 
enue, unless perhaps the borrower is a spendthrift, who contracts 

“Only true if “commodity” be understood to include solely goods which 
constitute income. 

” The “whole annual produce” must be taken to mean the income and not 
the whole mass of goods produced, including those which perish or arc used 
up m the creation of others. 

Some parts of this “other revenue,” viz., interest and taxes, are mentioned 
m the next paragraph. It is perhaps also intended to include the rent oi 
houses; see below, pp. 264, 265. 


a second debt in order to pay the interest of the first. The revenue 
which proceeds altogether from land, is called rent, and belongs to 
the landlord. The revenue of the farmer is d^fived partly from his 
labour, and partly from his stock. To him, land is only the instru- 
ment which enables him to earn the w.ages of thi.s labour, and to 
make the profits of this stock. All taxes, and all the jjpvenue which 
is founded upon them, all salaries, pen.sions, and annuities of every 
kind, are ultimately derived from some one i)r other of tho.«e three 
original sources of revenue, and are paid either immediately or 
mediately from the wages of labour, the profits of stock, or the rent 
of land. 

When those three different sorts of revenue belong to different 
persons, they are readily distinguished: but when they belong to 
the same they are sometimes confounded with one another, at least 
m common language. 

A gentleman who farms a part of his own estate, after paying the 
expence of cultivation, should gain both the rent of the landlord 
and the profit of the farmer. He is apt to denominate, however, his 
whole gain, profit, and thus confounds rent with profit, at in 
common language. The greater part of our North American and 
West Indian planters are in this situation. They farm, the greater 
part of them, their own estates, and accordingly we seldom hear of 
the rent of a plantation, but frequently of its profit. 

Common farmers seldom employ any overseer to direct the gen- 
eral operations of the farm. They generally too work a good deal 
with their own hands, as ploughmen, harrowers, &c. What remains 
of the crop after paying the rent, therefore, should not only replace 
to them their stock employed in cultivation, together with its ordi- 
nary profits, but pay them the wages which are due to them, both 
as labourers and overseers. Wh.itcvcr remains, however, after pay- 
ing the rent and keeping up the stork, is caljed profit. But wages 
evidently make a part of it. The farmer, by saving these wages, 
must necessarily gain them. Wages, therefore, are in this case con- 
founded with profit. 

An independent manufacturer, who has stock enough both to 
purchase materials, and to maintain himself till he can carry his 
work to market, should gain both the wages of a journeyman who 
works under a master, and the profit which that master makes by 
the sale of the journeyman’s work.^® His whole gains, however j are 
commonly called profit, and wages are, in this case too, confounded 
with profit.®® 

A gardener who cultivates his own garden with his own hands, 

“ Ed. I reads “sale of his work.' 

"Below, pp. nj-113. 


unites in his own purson the three different characters, of landlord, 
farmer, and labourer. His produce, therefore, should pay him the 
rent of the first, the profit of the second, and the wages of the third. 
The whole, however, is commonly considered as the earnings of 
his labour. Both rent and profit are, in this case, confounded with 

As in a civilized country there are but few commodities of which 
the exchangeable value arises from labour only, rent and profit 
contributing largel}' to that of the far greater part of them, so the 
annual produce of its labour will always be sufficient to purchase 
or command a much greater quantity of labour than what was em- 
ployed in raising, preparing, and bringing that produce to market. 
If the society were annually to employ all the labour which it 
can annually purchase, as the quantity of labour would increase 
greatly every year, so the produce of every succeeding year would 
be of vastly greater value than that of the foregoing. But there is 
no country in which the whole annual produce is employed in main- 
taining the industrious. The idle every where consume a great part 
of it; and according to the different proportions in which it is an- 
nually divided between those two different orders of people, its 
ordinary or average value must either annually increase, or dimin- 
ish, or continue the same from one year to another. 

“ Eds. i-j read “was.’ 



There is in every society or neighbourhood an ordinary or aver- 
age rate both of wages and profit in every different employment of 
labour and stock. This rate is naturally regulated, as I shall show 
hereafter,- partly by the general circumstances jaf the society, their 
riches or poverty, their advancing, stationary, or declining con- 
dition; and partly by the particular nature of each employment. 

There is likewise in every society or neighbourhood an ordinary 
or average rate of rent, which is regulated too, as I shall show here- 
after,® partly by the general circumstances of the society or neigh- 
bourhood in which the land is situated, and partly by the natural 
or improved fertility of the land. 

These ordinary or average rates may be called the natural rates 
of wages, profit, and rent, at the time and place in which tb-’y 
commonly prevail. (.j. 

When the price of any commodity is neither more nor less 4^ 
what is sufficient to pay the rent of the land, the wages of the 
labour, and the profits of the stock employed in raising, preparing, 
and bringing it to market, according to their natural rates, the 
commodity is then sold for what may be called its natural price. 

The commodity is then sold precisely for what it is worth, or for 
what it really costs the person who brings it to market; for though ' 
in common language what is called the prime cost of any commod- 
ity does not comprehend the profit of the person who is to sell it 
again, yet if he sells it at a price which does not allow him the 
ordinary rate of piofit in his neighbourhood, he is evidently a loser 
by the trade; since by employing his stock in some other way he 
might have made that profit. His profit, besides, is his revenue, the 
proper fund of his subsistence. As, while he is preparing and bring- 
ing the goods to market, he advances to his workmen their wages, 
or their subsistence; so he advances to himself, in the same manner, 

'The chapter follows Lectures, pp. 173-182, very closely. 

' Below, diaps. viii. and ix. ' Below, chap. xi. 

5 S 


his own subsistence,* which is generally suitable to the profit which 
he may reasonably expect from the sale of his goods. I. nless they 
yield him this profit, therefore, they do not repay him what they 
may very properly be- said to have really cost him. 

Though the price, therefore, which leaves him thi.s profit, is nOt 
always the lowest at which a dealer may sometimes sell his goods, 
it is the lowest at which^e is likely to sell them for any considerable 
time; at least where there is perfect liberty,-* or where he may 
change his trade as often as he pleases. 

The actual price at which any commodity is commonly sold is 
called its market price. It may either be above, or below, or exactly 
the same with its natural price. 

The market price of every particular commodity is regulated by 
the proportion between the quantity which is actually brought to 
market, and the demand of those who are willing to pay the natural 
price of the commodity, or the whole value of the rent, labour, and 
profit,’’ which must be paid in order to bring it thither. Such people 
may be called the effectual demanders, and their demand the ef- 
fectual demand; since it may be sufficient to effectuate the bringing 
of the commodity to market. It is different from the absolute de- 
mand. A very poor man may be siiid in some sense to have a 
demand for a coach and six; he might like to have it; but his de- 
mand is not an effectual demand, as the commodity can never be 
brought to market in order to satisfy it. 

When the quantity of any commodity which is brought to market 
falls short of the effectual demand, all those who are willing to pay 
the whole value of the rent, wages, and profit, which must be paid 
in order to bring it thither, cannot be supplied with the quantity 
which they want. Rather than want it altogether, some of them will 
be willing to give more. A competition will immediately begin 
among them, and the market price will rise more or less above the 
natural price, according as either the g reatn ess of the deficiency, or 
the wealth and wanton luxury of the competitors, happen to ani- 
mate more or less the eagerness of the competftion. Among com- 
petitors of equal wealth and luxury the same deficiency ” will gen- 
erally occasion a more or less eager competition, according as the 
acquisition of the commodity happens to be of more or less im- 
port^ce to them.’^ Hence the exorbitant price of the necessaries of 
life during the blockade of a town or in a famine. 

* The same phrase occurs below, pp. 62, 99. ‘ Above, p. 50 and note 13 

Ed. I, beginning three lines higher up, reads "according as the greatness of 
the deficiency increases more or less the eagerness of this competition. The 
same deficiency.” 

’ Ed. I reads “the competitors.” 


■ When the quantity brought to market exceeds the efiectual de- 
mand, it cannot be all sold to those who are willing to pay the 
whole value of the rent, wages and profit, which must be paid 5n 
order to bring it thither. Some part must be sold to those who are 
willing to iiay le.^s, and the hnv price which they give for it must 
reduce the price of the whole. The market price will sink more or 
less below the natural price, according as^he greatness of the ex- 
cess more or less the competition of the sellers, or accord- 
ing as it hajipcns to be more or less important to them to get im- 
mediately rid of the commodity. The same excess in the importa- 
tion of peri.shable, will occasion a much greater competition than in 
that of durable cmnnuHlities: in the importation of oranges, for ex- 
ample, than in that of old iron. 

When the quantity brought to market is just sufficient to supply 
the effectual demand and no more, the market price naturally 
comes to he either exactly, or as nearly as can be judged of, the 
same with the natural price. Tlie whole quantity upon hand can be 
disposed of for this price, and cannot be disjiosed of for more. The 
competition of the different dealers obliges them all to accept of 
this price, but does not oblige them to accept of less. 

The quantity of every commodity brought to market naturally 
suits itself to the effectual demand . It is the interest of all those 
who employ their land, labour, or stock, in bringing any commod- 
ity to market, that the quantity never should exceed the effectual 
demand; and it is the interest of all other people that it never 
should fall short of that demand.** 

If at any lime it exceeds the effectual demand, some of the com- 
ponent parts of its price be paid below their natural rate. If 
it is rent, the interest of the landlords will immediately prompt 
them to withdraw a part of their land; and if it is wages or profit, 
the interest of the labourers in the one case, and of their employers 
in the other, will prompt them to withdraw a part of their labour 
or stock from* this employment. The quantity brought to market 
will soon be no more than sufficient to .supply the demand. 
.All the different parts of its price will rise to their natural rate, and 
the whole price to its natural price. 

If, on the contrary, the quantity brought to market should at 
any time fall .short of the effectual demand, some of the component 
parts of its price must rise above their natural rate. If it is rent, the 
interest of all other landlords will naturally prompt them to pre- 
pare more land for the raising of this commodity; if it is wages or 
profit, the interest of all other labourers and dealers will soon 

" Ed. I reads “fall short of it.” 

58 the wealth op NATIONS 

prompt them to employ more labour and stock in preparing and 
bringing it to market. The quantity brought thither will soon be 
sufficient to supply t^e effectual demand. All the different parts of 
its prifie wiil soon sink to thei^ natural rate, and the whole price to 
its natural price. 

The natural price, therefore, is, as it were, the central price, to 
which the prices of all commodities are continually gravitating. 
Different accidents may sometimes keep them suspended a good 
deal above it, and sometimes force them down even somewhat be- 
low it. But whatever may be the obstacles which hinder them from 
settling in this center of repose and continuance, they are con- 
stantly tending towards it. 

The whole quantity of industry annually employed in order to 
bring any commodity to market, naturally suits itself in this man- 
ner to the effectual..demand. It naturally aims at bringing always 
that precise quantity thither which may be sufficient to supply, and 
no more than supply, that demand. 

But in some employments the same quantity of industry will in 
different years produce very different quantities of commodities; “ 
while in others it wiil produce alw'ays the same, or very nearly the 
same. The same number of labourers in husbandry will, in differ- 
ent years, produce very different quantities of corn, wine, oil, hops, 
&c. But the same number of spinners and weavers will every year 
produce the s^me or very nearly the same quantity of linen and 
woollen cloth. It is only the average produce of the one species of 
industry which can be suited in any respect to the effectual de- 
mand; and as its actual produce is frequently much greater and 
frequently much less than its average produce, the quantity of the 
commodities brought to market will sometimes exceed a good deal, 
and sometimes fall short a good deal, of the effectual demand. Even 
though that demand therefore should continue always the same, 
their market price will be liable to great fluctuations, will some- 
times fall a good deal below, and sometimes rise a good deal above, 
their natural price; In the other species of industry, the produce of 
equal quantities of labour being always the same, or very nearly 
the same, it can be more exactly suited to the effectual demand. 
While that demand continues the same, therefore, the market price 
of the commodities is likely to do so too, and to be cither altogether, 
or as nearly as can be judged of, the same with the natural price. 
That the price of linen and woollen cloth is liable neither to such 
frequent nor to such great variations as the price of corn, every 
man s experience will inform him. The price of the one species of 

® See below, p. ii6. 



commodities '^ries only with the variations in the demand: That 
of the other varies not only with the variations in the demand, bu( 
with the much greater and more frequent variations in the quantitj 
of what is brought to market in orde* to supply that demanJ’. 

The occasional and temporarj' fluctuations in the market price of 
any commodity fall chiefly upon those parts of its price which re- 
solve themselves into wages and profit. That pait which resolves 
itself into rent is less affected by them. A rent certain in money is 
not in the least affected by them either in its rate or in its value. A 
rent which consists either in a certain proportion or in a certain 
quantity of the rude produce, is no doubt affected in its yearly 
value by all the occasional and temporary fluctuations in the 
market price of that rude produce; but it is seldom affected by 
them in its yearly rate. In settling the terms of the lease, the land- 
lord and tarmcr endeavour, according to theii; best judgment, to 
adjust that rate, not to the temporary and occasional, but to the 
average and ordinary price of the produce. 

Such fluctuations affect both the value and the rate cither of 
wages or of profit, according as the market happens to be either 
over-stocked or under-stocked with commodities or with labour; 
with work done, or with work to be done. A public mourning raises 
the price of black cloth (with which the market is almost always 
under-stocked upon such occasions), and augments the profits of 
the merchants who possess any considerable quantity of it. It has 
no effect upon the wages of the weavers. The market is under- 
stocked with commodities, not with labour; with work done, not 
with work to be done. It raises the wages of journeymen taylors. 
The market is here under-stocked with labour. There is an effect- 
ual demand for more labour, for more work to be done than can 
be had. It sinks the price of coloured silks and cloths, and thereby 
reduces the profits of the merchants who have any considerable 
quantity of them upon hand. It sinks too the wages of the work- 
men emplo}-ed in preparing such commodities, for which all de- 
mand is stopped for six months, perhaps for a twelvemonth. The 
market is here over-stix:ked both with commodities and with 

But though the market price of every particular commodity is 
in this manner continually gravitating, if one may say so, towards 
the natural price, yet sometimes particular accidents, sometimes 
natural causes, and sometimes particular regulations of police, 
may, in many commodities, keep up the market price, for a long 
time together, a good deal above the natural price. 

” Repeated below, p. ii6. 

” Ed. I does not contain “more: 


When by an incrtase in the effectual dejuaiul, tl^ market price 
of some particular commodity happens to rise a good deal above 
the natural price, those who employ their stocks in supplying that 
market are generally careful to conceal this change. If it was com- 
monly knoviTi, their great profit would tempt so many new rivals 
to employ their stocks in the same way, that, the effectual demand 
being fully supplied, the market price would soon be reduced to the 
natural price, and perhaps for some time even below it. If the mar- 
ket is at a great distance from the residence of those who supply 
it, they may sometimes be able to keep the secret for several years 
together, and may so long enjoy their extraordinary profits with- 
out any new rivals. Secrets of this kind, however, it must be ac- 
knowledged, can seldom be long kept; and the extraordinarj'^ profit 
can last very little longer than they are kept. 

Secrets in manufactures are capable of being longer kept than 
secrets in trade. A dyer who has found the means of producing a 
particular colour with materials which cost only half the price of 
those commonly made use of, may, with good management, enjoy 
the advantage of his discovery as long as he lives, and even leave 
it as a legacy to his posterity. His extraordinary gains arise from 
the high price which is paid for his private labour. They properly 
consist in the high wages of that labour. But as they are repeated 
upon ei’ery part of his stock, and as their whole amount bears, up- 
on that account, a regular proportion to it, they are commonly 
considered as extraordinary profits of stock.^^ 

Such enhancements of the market price are evidently the effects 
of particular accident.^, of which, however, the operation may 
sometimes last for many years together. 

Some natural productions require such a singularity of soil and 
situation, that all the land in a great country, which is fit for pro- 
ducing them, may not be sufficient to supply the effectual demand. 
The whole quantity brought to market, therefore, may be dis- 
posed of to those who are willing to give more than what is suf- 
ficient to pay the rent of the land which produced them, together 
with the wages of the labour, and the profits of the stock which 
were employed in preparing and bringing them to market, accord- 
ing to their natural rates. Such commodities may continue for 
whole centuries together to be sold at this high price; and that 

“ They arc called profits simply because all the gains of the master-manu- 
facturer are called profits. They can scarcely be said to have been “consid- 
ered” at all ; if they had been, they would doubtless have been pronounced to 
be, in the words of the next paragraph, “the effects of a particular accident,” 
namely, the possession of peculiar knowledge on the part of the dyer. 

“ Ed. I places “for whole centuries together” here instead of where printed. 



part oi it whifli resolves itself into the rent erf land is in this case 
the part which is generally paid above its natural rate. The rent 
of the liiPfl Atliich affords such singular and esteemed productions, 
like the rent of some vineyards in France of a peculiarly happy 
soil and .situation, bears no regular proportion to the rent of other 
equally fertile and equally well-cultivated land in its neighbour- 
hood. The wages of the labour and the profits of the stock em- 
ployed in bringing such commodities to market, on the contrary, 
are seldom out of their natural proportion to those of the other 
employments of labour and .stock in their neighbourhood. 

Such enhancements of the market price are evidently the effect 
of natural causes which may hinder the effectual demand from ever 
being fully supplied, and which may continue, therefore, to operate 
for ever, 

monopoly granted either to an individual gr to a trading com- 
pany has the same effect as a secret in trade or manufactures. The 
monopolists, by keeping the market constantly under-stocked, by 
never fully supplying the effectual demand, sell their commodities 
much above the natural price, and raise their emoluments, whether 
they consist in wages or profit, greatly above their natural rate. 

The price of monopoly is upon every occasion the highest which 
can be got. The natural price, or the price of free competition, on 
the contrary, is the lowest which can be taken, not upon every oc- 
casion indeed, but for any considerable time together. The one is 
upon every occasion the highest which can be squeezed out of the 
buyers, or which, it is supposed, they will consent to give: The 
other is the lowest which the sellers can commonly afford to take, 
and at the same time continue their business. 

The exclusive privileges of corporations, statutes of apprentice- 
ship,^* and all those laws which restrain, in particular employ- 
ments, the competition to a smaller number than might otherwise 
go into them, have the same tendency, though in a less degree. 
They are a scM't of enlarged monopolies, and may frequently, for 
ages together, and in whole classes of employments, keep up the 
market price of particular commodities above the natural price, 
and maintain both the wages of the labour and the profits of the 
stock employed about them somewhat above their natural rate. 

“ See below, pp. 118-130, Playfair, in a note on this passage, ed. Wealth of 
Nations, 1803, vol. i., p. 97, says: “This observation about corporations and 
apprenticeships scarcely applies at all to the present day. In London, for ex- 
ample, the freemen only can carry on certain businesses within the city: there 
is not one of those businesses that may not be carried on elsewhere, and, the 
produce sold in the city. If Mr. Smith’s principle applied, goods weuld he 
dearer in Cheapside than in Bond Street, which is not the case.” 


Such enhancements of the market price may last, as long as the 
regulations of police which give occasion to them. 

• The market price of any particular commodity, though it may 
continue long above^ can seldom continue long below, its natural 
price. Whatever, part of it was paid below the natural rate, the 
persons whose interest it eJfected would immediately feel the loss, 
and would immediately withdraw either so much land, or so much 
labour, or so much stock, from being employed about it, that the 
quantity brought to market would soon be no more than .suffirient 
to supply the effectual demand. Its market price, therefore, would 
soon rise to the natural price. This at least would be the case where 
there was perfect libert)’.’”’ 

The same statutes of apprenticeship and other corporation laws 
Indeed, which, when a manufacture is in prasperily, enable the 
workman to raise bi-'' wages a gootl deal above their natural rate, 
sometimes oblige him, when it decay.s, to let them down a good 
deal below it. .Vs in the one they exclude m.any people from 
his employment, so in the other they exclude him from many em- 
ployments. The effect of such regulations, however, is not near so 
durable in sinking the workman's wages below, as in raising them 
above, their natural rate. Their operation in the one way may en- 
dure for many centuries, but in the other it can last no longer than 
the lives of some of the workmen who were bred to the business in 
the time of its prosperity. When they arc gone, the number of those 
who are afterwards educated to the trade will naturally suit itself 
to the effectual demand. The police must be as violent as that of 
Indostan or ancient Egypt (where every man was bt)und by a 
principle of religion to follow the occupation of his father, and was 
supposed to commit the most horrid sacrilege if he changed it for 
another), which can in any particular employment, and for several 
generations together, .sink cither the wages of labour or the profit.s 
of stock below their natural rate. 

This is all that I think nece.ssary to be observed at present con- 
cerning the deviations, whether occasional or permanent, of the 
market price of commodities from the natural price. 

The natural price itself varies with the natural rate of each of 
its component parts, of wages, profit, and rent; and in every so- 
ciety this rate varies according to their circumstances, according 
to their riches or poverty, their advancing, stationary, or declining 
condition. I shall, in the four following chapters, endeavour to ex- 

“ Above, p. s6, and below, p. gg. 

In Lectures, p. j 68, the Egyptian practice is attributed to “a law of Scsos- 


plain, as fully and distinctly as I can, the causes of those different 

First, I shall endeavour to explain what arc the circumstances 
which naturally determine the rate of wastes, and in what manner 
those circumstances are affected by the riches oy. poverty, by the 
advancin';, stationary, or declinin'; state of the societ)', 

Secondlj', I shall endeavour to show what are the circumstances 
which naturally determine the rate of profit, and in what manner 
too those circumstances are affected by the like vfiriations in the 
state of the society. 

Though pecuniary wages and profit are \ eiy different in the dif- 
ferent employment'' of labour and stock: yet a certain proportion 
seems commonly to take place between both the pecuniary wages 
in all the different employments of labour, and the pecuniarj* prof- 
its in all the different employments of stock.. This proportion, it 
will appear hereafter, depends partly upon the nature of the dif- 
ferent emploj-menl-S, and partly upon the different laws and policy 
of the society in which they are carried on. But though in many re- 
spects dependent upon the laws anil policy, this proportion seems 
to be little afl',’cted by the riches or poverty of that society: by its 
advancing, stationary, or declining condition; bift to remain the 
same or very nearly the same in all those different states. I shall, in 
the third place, endeavour to explain all the different circumstances 
which regulate this proportion. 

In the fourth and last place, I shall endeavour to show what 
are the circumstances which regulate the rent of land, and which 
either raise or lower the real price of all the different substances 
which it produces. 



The produce of labour constitutes the natural reconipence or wages 
of labour. 

In that original state of things, which precedes both the appro- 
priation of land and the accumulation of stock, the v/hole produce 
of labour belongs to the labourer.^ He has neither landlord nor 
master to share with him. 

Had this state continued, the wages of labour would have aug- 
mented with all those improvements in its productive powers, to 
which the division of labour gives occasion. All things would 
gradually have become cheaper They would have been produced 
by a smaller quantity of labour; and as the commodities produced 
by equal quantities of labour would naturally in this stale of things 
be exchanged for one another, they would have been purchased 
likewise with the produce of a smaller quantify. 

But though all things would have become cheaper in reality, in 
appearance many things might have become dearer than before, or 
have been exchanged for a greater quantity of other goods.” Let us 
suppose, for example, that in the greater part of employments the 
productive powers of labour had been improved to tenfold, or that 
a day’s labour could produce ten times the quantity of work which 
it had done originally; but that in a particular employment they 
had been improved only to double, or that a day’s labour could 
produce only twice the quantity of work which it had done before. 
In exchanging the produce of a day's labour in the greater part of 
employments, for that of a day’s labour in this particular one, ten 
times the original quantity of work in them would purchase only 

' The same nine words occur above, p. 47, in cd. 2 and later eds. 

’ The word “cheaper” is defined by the next sentence as “produced by a 
smaller quantity of labour.” 

'It would be less confusing if the sentence ran; “But though all things 
would have become cheaper in the sense just attributed to the word, yet in the 
sense in which the words cheaper and dearer are ordinarily used many things 
might have become dearer than before.” 



twice the original quantity in it. Any partipular quantity in it, 
therefore, a pound weight, for example, would appear to be five 
times dearer than before.'* In reality,® however, it would be twice 
as cheap. Though it required five times the quantity of other goods 
to purchase it, it would require only half the quantity of labour 
either to purchase or to produce it. The acquisition, therefore, 
would be twice as easy “ as before. 

But this original state of things, in which the labourer enjoyed 
the whole produce of his own labour, could not last beyond the 
first introduction of the appropriation of land and the accumulation 
of stock. It was at an end, therefore, long before the most con- 
siderable improvements were made in the productive powers of 
labour, and it would be to no purpose to trace further what might 
have been its effects upon the recompence or wages of labour. 

. I As soon as land becomes private property, the landlord demands 
a share of almost all the produce which the *labourer can either 
raise, or collect from it. His rent makes the first deduction from 
the produce of the labour which is employed upon landil 

It seldom happens that the person who tills the ground has 
wherewithal to maintain himself till he reaps the harvest. His 
maintenance is generally advanced to him from the stock of a 
master, the farmer who employs him. and who would have no in- 
terest to employ him, unless he was to share in the produce of his 
labour, or unless his stock was to be replaced to him with a profit. 
This profit makes a second deduction from the produce of the 
labour which is employed upon land. 

The produce of almost all other labour is liable to the like de- 
duction of profit. In all arts and manufactures the greater part of 
the workmen stand in need of a master to advance them the ma- 
terials of their work, and their wages and maintenance till it be 
compleated.” He shares in the produce of their labour, or in the 
value w'hich it adds to the materijds upon which it is bestowed; and 
in this share consists his profit.® 

It sometimes happens, indeed, that a single independent work- 
man has stock sufficient both to purchase the materials of his work, 
and to maintain himself till it be compleated. He is both master 

* I.e., “would in the ordinary sense of the word be five dmes dearer than 

‘ I.e., “in the sense attributed to the word above.” * 

“ If the amount of labour necessary for the acquisition of a thing measures 
its value, “twice as cheap” means simply, twice as easy to acquire. 

’ Ed. I reads “of whatever produce." 

* The provision of tools to work with and buildings to work in is forgotten. 

° Cp. with this account that given at the beginning of chap vi., pp. 47, 48 




and workman, and ^njoys the whole produce of his own labour, 
• or the whole value which it adds to the materials uffbn which it is 
bestowed. It includes what are usually two distinct revenues, be- 
longing to two jiistintt persons, the profits of stock, and the wages 
of labour. 

Such cases, however, are not very frequent, and in every part of 
Europe, twenty workmen serve under a master for one that is in- 
dependent; and the wages of labour are every where understood to 
be, what they usually are, when the labourer is one person, and the 
owner of the stock which employs him another. 

Wliat are the common wages of labour, depends every where up- 
on the contract usually made betw'cen those two parties, whose 
interests are by no means the same. The workmen desire to get as 
much, the masters to give as little as possible. The former are dis- 
posed to combine in order to raise, the latter in order to lower tlje 
wages of labour. 

It is not, however, difficult to foresee which of the two parties 
must, upqn all ordinary occasions, have the advantage in the dis- 
pute, and force the other into a compliance with their terms.Cl'he 
masters, being fewer in number, can combine much more easily; 
and the law, besides, authorises, or at least does not prohibit their 
combinations,’” while it prohibits those of the workmen.” We have 
no acts of parliament against combining to lower the price of work; 
but many against combining to raise it. In all such disputes the 
masters can hold out much longer. A landlord, a farmer, a master 
manufacturer, or merchant, though they did not employ a single 
workman, could generally live a year or two upon the stocks which 
they have already acquired. IMany workmen could not subsist a 
week, few could subsist a month, and scarce any a year without em- 
ployment. In the long-run the workman may be as nece.ssary to his 
master as his master is to him, but the necessity is not so im- 

We rarely hear, it has been said, of the combinations of masters, 
though frequently of those of workmen. But whocvc'r imagines, up- 
on this account, that masters rarely combine, is as ignorant of the 
world as of the subject. (plasters arc always and every where in a 
sort of tacit, but constant and uniform combination, not to 

“ Ed. I reads, “The masters being fewer in number can not only combine 
more easily, but the law authorises their combinations, or at least does not 
prohibit them.” 

7 Geo. ]., stat. I, c. 13, as to London tailors; 12 Geo. I., c. 34, as to 
woolcombers and weavers; 12 Geo. I., c. 35, as to brick and tile makers with- 
in fifteen miles of London; 22 Geo. II., c. 27, § 12, as to persons employed in 
the woollen manufacture and many others. 



the wages of Jabour above their actual rate. ‘To violate this, com- ^ 
bination is every where a most unpopular action, and a sott of re- 
proach to a master among his neiehbours anil equals. lYe seklotn* 
indeed, hear of this combination, because it Is the usual, and one 
may say, the natural state of things which nobody ever hears of. 
Masters too sometimes enter into particular combinations to sink 
the wages of labour even below this rate. These are always con- 
ducted with the utmost silence and secrecy, till the moment of 
execution, and when the workmen yield, as they sometimes do, 
without resistance, severely felt by them, they are never 
heaid of by other people. Such combinations, however, are fre- 
quently resisted by a contrary defensive combination of the work- 
men; who sometimes too, without any provocation of this kind, 
ctjmbine of their own accord to raise the price of their labour. Their 
usual pretences'- are, sometimes the high price of provisions; 
sometimes the great profit which their masters make by their work. 
But whether their combinations be offensive or defensive, they are 
always abundantly heard of. In order to bring the point to a spcetly 
decision, they hiive always recourse to the loudest clamour, ami 
sometimes to the most shocking violence and outr.ige. They arc 
desperate, and act with the folly and extravagance of desperate 
men, who must cither starve, or frighten their masters into an 
immediate compliance with their demands. The masters upon these 
occa.sions are just as clamorous upon the other side, .and never 
cease to coll aloud for the assistance of the civil magistrate, and 
the rigorous execution of those laws which have been enacted with 
so much severity against the combinations of servants, labourers, 
and journeymen. The workmen, accordingly, very seklom derive 
any advantage from the violence of those tumultuous combina- 
tions, which, partly from the interposition of the civil nngisliate, 
partly from the .superior steadiness of the masters, partly from the 
necessity which the greater part ot the workmen are nmler of sub- 
mitting for tliB sake of prc.sent subsistence, geiu'rally end in noth- 
ing, but the punislimenl or ruin of the ring-leaders. 

But though in disputes with their workmen, masters must gen- 
erally have the advantage, tlicre is however a certain rate below 
whidi it seems impossible to reduce, for any considerable time, the 
ordinary wages even of the lowest species of labour. 

A man must always live by his work, and his wages must at least 
be sufficient to maintain him. They must even upon most occasions 

“ The word is used as elsewhere in Adam Smith without the implication of 
falsity now attached to it: a pretence is simply something put forward. 

“ Ed. I does not contain “cither." 


be somewhat more ; •otherwise it would be impossible for him to 
bring up a family, and the race of such workmen could not last be- 
yond the first generation. Mr. Cantillon seems, upon this account, 
to suppose that the lowest species of common labourers must every 
where earn al^ast double their own maintenance, in order that 
one with anot* they may be enabled to bring up two children; 
the labouf'of the wife, on account of her necessary attendance on 
the children, being supposed no more than sufficient to provide for 
herself.^^ But one-half the children born, it is computed, die before 
the age of manhood.^"’ The poorest labourers, therefore, according 
to this account, must, one with another, attempt to rear at least 
four children, in order that two may have an equal chance of living 
to that age. But the necessary maintenance of four children, it is 
supposed, may be nearly equal to that of one man' The labour of 
an able-bodied slaye, the same author adds, is computed to be 
worth double his maintenance; and that of the meanest labourer, 
he thinks, cannot be worth less than that of an able-bodied slave. 
Thus far at least seems certain, that, in order to bring up a family, 
the labour of the husband and wife together must, even in the lo'.ii- 
est species of common labour, be able to earn something more than 
what is precisely necessary for their own maintenance ; but in what 
proportion, whether in that above mentioned, or in any other, I 
shall not take upon me to determine.^®/ 

There are certain circumstances, however, which sometimes give 
the labourers an advantage, and enable them to raise their wages 
considerably above this rate; evidently the lowest which is consist- 
ent with common humanity. 

When in any country the demand for those who live by wages; 
labourers, journeymen, servants of every kind, is continually in- 
creasing; when every year furnishes employment for a greater 
number than had been employed the year before, the workmen 
have no occasion to combine in order to raise their wages. The 
scarcity of hands occasions a competiti on among mas ters, who bid 
against one another, in order to get workmen,” and thus volun- 
tarily break through the natural combination of masters not to 
raise wages, 

“Esiui sur la nature du commerce en gineral, 1755, pp. 42-47. The “seems” 
is not meaningless, as Cantillon is unusually obscure in the passage referred to. 
It is not clear whether he intends to include the woman’s earnings or not. 

“/.e., before completing their seventeenth year, as stated by Dr. Halley, 
quoted by Cantillon, Essai, pp. 42, 43. 

” Cantillon himself, p. 44, says: “C’cst unc matiere qui n’admel pas uii cal- 
cul exact, ct dans laquelle la precision n’est pas meme fort necessaire, il suffit 
qu on ne s’y eloigne pas beaucoup de la realitf.” 

’’ Ed. I reads “them.” 


The demand, for those who live by wages, it is evident, cannot 
increase but in proportion to the increase of the funds which are 
destined for the payment of wages. These funds are of two kinds' 
first, the revenue which is over and above what is necessary for the 
maintenance; and, secondly, the stock which is ^r and above 
what is necessary for the employment of their mast^. • _ 

When the landlord, annuitant, or monied man, has a grfeater rev- 
enue than what he judges sufficient to maintain hiis own family, he 
employs either the whole or a part of the surplus in maintaining 
one or more me nial serva nts.^" Increase this surplus, and he will 
naturally increase the number of those servants.'^ 

When an independent workman, such as a weaver or sh#e-maker, 
has got more stock than what is sufficient to purchase the materials 
of his own work, and to maintain himself till he can dispose of it, 
he naturally employs one or more journeymen ryith the surplus, in 
order to make a profit by their work. Increase this surplus, and he 
will naturally increase the number of his journeymen. 

The demand for those who live by wages, therefore, necessarily 
increases with the increase of the revenue and stock of every coun- 
try, and cannot possibly increase without it. The increase of rev- 
enue and stock is the increase of national wealth.®” The demand 
for those who live by wages, therefore, naturally increases with the 
increase of national wealth, and cannot possibly increase without it. 

It is not the actual greatness of national wealth, but its con- 
tinual increase, which occasions a rise in the wages of labour. It 
is not, accordingly, in the richest countries, but in the most thriv- 
ing, or in those which are growing rich the fastest, that the wages of 
labour arc highest. England is certainly, in the present times, a 
much richer -- country than any part of North America. The wages 
of labour, hmvever, are much higher in North America than in any 
part of England. In the province of New York, common labourers 

’’There is no p.ttcmpt to dclmc “ n.wntcniinc(..'’ and consequontly the di- 
vision of a's revenue into what K neccssaiw for his maintenance and what 
is over and above is left perfectly vaRue. 

’"It secm.s to be implied here that keeping a menial servant, even to per- 
form the mo^t necessary offices (c .i;., to nur-e the infant child of a widower), 
is not “maintainina” a family. 

“Above, in the Introduction and Plan of the Work, the wealth of a nation 
was treated as synonymous with its annual produce, and there has been hith- 
erto no suggestion that its stock must be considered. 

” Apparently this is a slip for “occasions high wages.” At any rate the next 
sentences require this assertion and not that actually made. 

“ The method of calculating wealth by the amount of annual produce per 
head adopted above, in the Introduction and Flan of the Work, is departed 
from here and below, p. 71, and frequently in later passages, in favour of the 
calculation by amount of capital wealth. 


earn three shillings and sixpence currency, equal to two shillings 
sterling, a day; ship carpenters, ten shillings and sixpence currency, 
with a pint of rum worth sixpence sterling, equal in all to six shil- 
lings and sixpence sterling; house carpenters and bricklayers, eight 
shillings currency, equal to four shillings and sixpence sterling; 
journeymen • taylors, five shillings currency, equal to about two 
■jhillings and ten pence sterling. These prices are all above the Lon- 
don price; an9. wages are said to be as high in the other colonies as 
in New York. The price of provisions is every where in North Amer- 
ica much lower than in England. A dearth has never been known 
there. In the worst seasons, they have always had a sufficiency for 
themselves, though less for exportation. If the money price of la- 
bour, therefore, be higher than it is any where in the mother coun- 
try, its real price, the real command of the necessaries and con- 
veniencies of life which it conveys to the labourer, must be higher 
in a still greater proportion. 

But though North .\merica is not yet so rich as England, it is 
much more thriving, and advancing with much greater rapidity to 
the further acquisition of riches. The most decisive mark of the 
prosperity of any country is the increase of the number of its in- 
habitants. In Great Britain, and most other European countries, 
they are not supposed to double in less than five hundred years. In 
the British colonies in North America, it has been found, that they 
double in twenty or five-and-twenty years.®* Nor in the present 
times is this increase principally owing to the continual importation 
of new inhabitants, but to the great multiplication of the species. 
Those who live to old age, it is said, frequently see there from fifty 
to a hundred, and sometimes many more, descendants from their 
own body. Labour is there so well rewarded that a numerous family 
of children, instead of being a burthen is a source of opulence and 
prosperity to the parents. The labour of each child, before it- can 

“‘This was written in 1773, before the commencement of the iate (iis- 
turbances. Ed. i does not contain this note ; cds. 2 and 3 read ‘’present dis- 

“Petty, Poltlical Arithmetic, 1699, p. 18, made the period for England 3O0 
years. Gregory King, quoted by Davenant, Woiki, cd. Whitworth, 1771, \ol. 
ii., p. 176, makes it 433 years in the past and probably 600 in the tuluie. In 
1703 the population of Virginia was 60,000, in 1755 it w’as 300,000, and in 
1763 it was 300,000, “by which they appear to have doubled their numbers 
every twenty years as nigh as may be.” — The Present State of Great Biilain 
and North America with regard to Agriculture, Popidation, Trade and Mami- 
jactures, 1767, p. 22, note. “The original number of persons who in 1643 had 
settled in New England was 21,200. Ever since, it is reckoned that more have 
left them than have gone to them. In the year 1760 they were increased to 
half a million. They have therefore all along doubled their own number in 
twenty-five years.” — Richard Price, Observations on Reversionary Payments, 
etc., 1771, pp. 204, 203. The statement as to America is repeated below, p. 392. 


leave their house, is computed to be worth a hundred pounds dear 
gain to them. A young widow with four or five young children, who, 
among the middling or inferior ranks of people in Europe, would- 
have so little chance for a second husband, is there frequently 
courted as a sort of fortune. The value of children is the greatest 
of all encouragements to marriage. We cannot, therefore) wonder 
that the people in North America should generally, marry very 
young. Notwithstanding the great increase occasioned by such 
early marriages, there is a continual complaint of the scarcity of 
hands in North America. The demand for labourers, the funds 
destined for maintaining them, increase, it seems, still faster than 
they can find labourers to employ. 

Though the wealth of a country should be very great, yet if it 
has been long stationary, we must not expect to find the wages of 
labour very high in it. The funds destined for the payment of wages, 
the revenue and stock of its inhabitants, may be of the greatest ex- 
tent; hut if they have continued for several centuries of the same, 
or very nearly of the same extent, the number of labourers em- 
ployed every year could easily supply, and even more than supply, 
the number wanted the following year. There could seldom be any 
scarcity of hands, nor could the masters be obliged to bid against • 
one another in order to get them. The hands, on the contrary, 
would, in this case, naturally multiply beyond their employment. 
There would be a constant scarcity of employment, and the labour- 
ers would be obliged to bid against one another in order to get it. If 
in such a country the wages of labour had ever been more than suf- 
ficient to maintain the labourer, and to enable him to bring up a 
family, the competition of the labourers and the interest of the 
masters would soon reduce them to this lowest rate which is con- 
sistent with common humanity. China has been long one of the 
richest, that is, one of the most fertile, best cultivated, most in- 
dustrious, and most populous countries in the world.-^ It seems, 
however, to havg been long stationary, lilarco Polo, who visited it 
more than five hundred years ago,-^ describes its cultivation, in- 
dustry, and populousness, almost in the same terms in which they 
are described by travellers in the present times. It had perhaps, 
even long before his time, acquired that full complement of riches 
which the nature of its laws and institutions permits it to acquire. 
The accounts of all travellers, inconsistent in many other respec'ls, 

“Here we have a third method of calculating the riches or wealth of a 
country, namely by the amount of produce per acre. For other references to 
this “wealth” of China see the index, sv , Chine 

“The date of his arrival was 1275. 


agree in the low wages of labour, and in the difficulty which a 
labouret finds in bringing up a family in China, ff by digging the 
•ground a whole day he can get what will purchase a small quantity 
of rice in the evening, he is contented The condition of artificers is, 
if possible, still worse. Instead of waiting indolently in their work- 
houses, foi the calls of their customers, as in Europe, they aie con- 
tinually running about the streets with the tools of their respective 
trades, offering their service, and as it were begging employment 
The poverty of the lower ranks of people in China fai surpasses 
that of the most beggarly nations in Europe. In the neighbourhood 
of Canton many hundred, it is commonly said, many thousand 
families have no habitation on the land, but live constantly in little 
fishing boats upon the rivers and canals The subsistence which 
they find there is so scanty that they are eagei to fish up the nastiest 
garbage thrown overboard from any European ship. Any can ion, 
the carcase of a dead dog or cat, for example, though half putrid 
and stinking, is as welcome to them as the most wholesome food 
to the people of other countries. Marriage is encouraged m China, 
not by the profitableness of children, but by the liberty of dcstioy- 
ing them. In all great towns several are every night exposed in the 
street, or drowned like puppies in the water. The performance of 
this horrid office is even said to be the avowed business by which 
some people earn their subsistence.*® 

“■ “Les. artisans courcnt Ics villes du matin au soir pour chcrchcr pr itique,” 
Quesna>, hphemendes du cttoyen. Mars, 1767, CEuvres, ed Oncken, 1888, 
P 581 

■" ‘ Cependant quelque sobre et qucique industrieux que soit le peuple dt la 
Chine, le grand nombre dc ^es habitants j cause bcautoup dc misere On en 
voit de SI pauvres, quo ne pouvant toumir a leurs cnfants le« aliments nece-:- 
saires, ils les exposent dans les rues, surtout lorsque les meres tombent mal- 
ades, ou qu elles manquent dc lait pour les nourrir Ces pelits innocents sont 
condamnes en quelque maniere a la mort presque au meme instant qu’ils ont 
commence dc vivre cela frappe dans les grandes villes, comme Peking Can- 
ton, car dans I“s autres villes a peine s’en apergoit-on 

“C’est ce qui a porte les missionnaircs a entretenir dans ces cndroit' tres 
peoples, un nombre de catcchistt«, qui en partagent cntrc»eux tons les quar- 
tiers, et les parcourent tous les matins, pour procurer la grace du bapteme 
a une multitude d’enfants raoiibonds 

“Dans la raemc \uc on a quclqutfois gagnt des sages-femmes infideles aim 
qu’elles pcrmi-cent a des fillcs chrctiinnes dc sts suivre dans les diffcrentcs 
maisons ou ellts sent appelees car il arrive quelquetois que les Chinois sc 
trouvant hors d’etat de nourrir une nombreusc famillc, engagent ces sages- 
fenynes 1 etouffer dans un bassin plan d’eau les pctits filles aussitot qu’illcs 
sont necs , ces chretiennes ont soin dc les baptiscr, et par ce moyen ces tristes 
virtimes de I’lndigcnce de leurs parents trouvent la vie cternclle dans ces 
mcmes eau\, qui leur ravissent une vie courtc et perissablc ” — Du Halde, De- 
scnption geographtque, hislonque, chrcmologtque, politique et physique de 
I empire de la Chine et de la Tartane chtnmse, 1735, tom u , pp 73, 74 The 
statement m the text above that drownmg babies is a special business is pos- 
sibly founded on a mistranslation of “sages-femmes.” 


China, however, though it may perhaps stand still, does not seem 
to go backwards. Its towns are no-where deserted by their inhabit- 
ants. The lands which had once been cultivated are no-where* 
neglected. The same or very nearly the same annual labour must 
therefore continue to be performed, and the flinds destined for 
maintaining it must not, consequently, be sensibly diminished. The 
lowest class of labourers, therefore, notwithstanding their scanty 
subsistence, must some way or another make shift to continue their 
race so far as to keep up their usual numbers. 

But it would be otherwise in a country where the funds destined 
for the maintenance of labour were sensibly decaying. Every year 
the demand for servants and labourers would, in all the different 
classes of employments, be less than it had been the year before. 
Jfany who had been bred in the superior classes, not being able to 
find employment in their own business, would be ^lad to seek it in 
the lowest. The lowest class being not only overstocked with its own 
workmen, but with the overflowings of all the other classes, the 
competition for employment would be so great in it, as to reduce 
the wages of labour to the most miserable and scanty subsistence of 
the labourer. ISIany would not be able to find employment even up- 
on these hard terms, but would either starve, or be driven to seek a 
subsistence either by begging, or by the perpetration perhaps of the 
greatest enormities. Want, famine, and mortality would immedi- 
ately prevail in that class, and from thence extend themselves to 
all the superior classes, till the number of inhabitants in the coun- 
try was reduced to what could easily be maintained by the revenue 
and stock which remained in it, and which had escaped either the 
tyranny or calamity which had destroyed the rest. This perhaps is 
nearly the present state of Bengal, and of some other of the Eng- 
lish settlements in the East Indies. In a fertile country which had 
before been much depopulated, where subsistence, consequently, 
should not be very difficult, and where, notwithstanding, three or 
four hundred thqjLisand people die of hunger in one year, we may be 
assured that the funds destined for the maintenance of the labour- 
ing poor are fast decaying. The difference between the genius of 
the British constitution which protects and governs North America, 
and that of the mercantile company which oppresses and domineers 
in East Indies, cannot perhaps be better illustrated than by the 
different state of those countries. 

The liberal. reward of labour, therefore, as it is the necessary ef- 
fect, so it is the natural symptom of increasing national wealth. 
The scanty maintenance of the labouring poor, on the other hand. 


is the natural symptom that things are at a stand, and their starving 
condition that they are going fast backwards. 

' In Great Britain the wages of labour seem, in the present times, 
to be evidently more than what is precisely necessary to enable the 
labourer to bring up a family. In order to satisfy ourselves upon 
this point it will not be necessary to enter into any tedious or 
doubtful calculation of what may be the lowest sum upon which it 
is possible to do this. There are many plain symptoms that the 
wages of labour are no-where in this country regulated by this low- 
est rate which is consistent with common humanity. 

First, in almost every part of Great Britain there is a distinction, 
even in the lowest species of labour, between summer and winter 
wages. Summer wages are always highest. But on account of the 
extraordinary expence of fewel, the maintenance of a family is most 
expensive in winter. Wages, therefore, being highest when this ex- 
pence is lowest, it seems evident that they are not regulated by 
what is necessary for this expence; but by the quantity and sup- 
posed value of the work. A labourer, k may be said indeed, ought to 
save part of his summer wages in order to defray his winter ex- 
pence ; and that through the whole year they do not exceed what is 
necessary to maintain his family through the whole year. /. slave, 
however, or one absolutely dependent on us for immediate subsist- 
ence, would not be treated in this manner. His daily subsistence 
would be proportioned to his daily necessities. 

Secondly, the wages of labour do not in Great Britain fluctuate 
with the price of provisions. These vary every-where from year to 
year, frequently from month to month. But in many places the 
money price of labour remains uniformly the same sometimes for 
half a century together. If in these places, therefore, the labouring 
poor can maintain their families in dear years, they must be at their 
ease in times of moderate plenty, and in affluence in those of extra- 
ordinary cheapness. The high price of provisions during these ten 
years past has not in many parts of the kingdom l^een accompanied 
with any sensible rise in the money price of labour. It has, indeed, 
in some; owing probably more to the increase of the demand for 
labour than to that of the price of proxdsions. 

Thirdly, as the price of provisions varies more from year to year 
than the wages of labour, so, on the other hand, the wages of la- 
bour vary more from place to place than the price of provisions. 
The prices of bread and butcher’s meat are generally the same or 
very nearly the same through the greater part of the united king- 
dom. These and most other things which are sold by retail, the way 
in which the labouring poor buy all things, are generally fully as 


cheap or cheaper in great towns than in the remoter parts of the 
country, for reasons which I shall have occasion to explain here- 
after.-’’ But the wages of labour in a great town and its neighbour-' 
hood are frequently a fourth or a fifth part, twenty or five-and- 
twenty per cent, higher than at a few miles distance. Eighteen 
pence a day may be reckoned the common price of labour in Lon- 
don and its neighbourhood. At a few miles distance it falls to four- 
teen and fifteen pence. Ten pence may be reckoned its price in 
Edinburgh and its neighbourhood. At a few miles distance it balls 
to eight pence, the usual price of common labour through the 
greater part of the low country of Scotland, where it varies a good 
deal less than in England.®" Such a difference of prices, which it 
seems is not alwaj’s sufficient to transport a man from one parish to 
another, would necessarily occasion so great a transportation of the 
most bulky commodities, not only from one parijh to another, but 
from one end of the kingdom, almost from one end of the world to 
the other, as would soon reduce them more nearly to a level. After 
all that has been said of the levity and inconstancy of human na- 
ture, it appears evidently from experience that a man is of all sorts 
of luggage the most difficult to be transported. If the labouring 
poor, therefore, can maintain their families in those parts of the 
kingdom where the price of labour is lowest, they must be in afflu- 
ence where it is highest. 

Fourthly, the variations in the price of labour not only do not 
correspond either in place or time with those in the price of pro- 
visions, but they are frequently quite opposite. 

Gcain, the food of the common people, is dearer in Scotland than 
in England, whence Scotland receives almost every year very large 
supplies. But English corn must be sold dearer in Scotland, the 
country to which it is brought, than in England, the country from 
which it comes; and in proportion to its quality it cannot be sold 
dearer in Scotland than the Scotch corn that comes to the same 
market in competition with it. The quality of grain depends chiefly 
upon the quantity of flour or meal which it yields at the mill, and in 
this respect English grain is so much superior to the Scotch, that, 
though often dearer in appearance, or in proportion to the measure 
of its bulk, it is generally cheaper in reality, or in proportion to its 
quality, or even to the measure of its weight. The price of labour, 
on the contrary, is dearer in England than in Scotland. If the la- 
bouring poor, therefore, can maintain their families in the one part 

“'Below, p. 113 . 

°°The difference between England and Scotland in this respect is attributed 
to the English law of settlement below, p. 140. 


of the united kingdom, they must be in affluence in the other. Oat- 
meal indeed supplies the common people in Scotland ■with the 
greatest and the best part of their food, which is in general much 
inferior to that of their neighbours of the same lank in Faigland.'*’ 
This difference, however, in rhe mode of their subsistence is not the 
cause, but the effect, of the difference in their wages; though, by a 
strange misapprehension, I have frequently heard it represented as 
the cause. It is not because one man keeps a coach while his neigh- 
bour walks a-foot. that the one is rich and the other poor; but be- 
cause the one is rich he keeps a coach, and the other is 
poor he walks a-foot. 

During the course of the century, taking one year with an- 
other, grain was dearer in both parts of the united kingdom than 
during that of the present. This is a matter of fact which cannot 
now admit of any, reasonable doubt; and the proof of it is, if jms- 
sible, still more decisive with regard to Scotland than with regard 
to England. It is in Scotland supported by the evidence of the pub- 
lic fiars, annual valuations made upon oath, according to the actual 
state of the markets, of all the different sorts of grain in every dif- 
ferent county of Scotland. If such direct proof could reiiuire any 
.collateral evidence to confirm it. I would observe that this has like- 
wise been the in France, and probably in other parts of 
Europe. With regaid to France there is the clearest proof.''- but 
though it is certain that in both parts of the united kingdom griiin 
was somewhat dearer in the last century than in the present, it is 
equally certain that labour was much cheaper. If the labouring 
poor, therefore, could bring up their families then, they be 
much more at their now. In the last century, the most usual 
day-wages of common labour through the greater part of Scotland 
w'ere sixpence in summer and five-pence in winter. I'hrec .sliillings a 
week, the same price very nearly, still continues to be [laid in some 
parts of the Highlands and Western Islands. 'I'hrough the grealei 
part of the low country the usual wages of common labour arc 
now eight-pence a day'; ten-jience, sometimes a .shilling about Fdin- 
burgh, in the counties which border upon England, probably on 
account of that nei.gbboiuhood, and in a few other places where 
there has lately been a considerable rise in the demand for labour, 
about Glasgow', Carron, .Ayr-shire, &c. In England the improve- 
ments of agriculture, manufactures and commerce began much 
earlier than in Scotland. I'he demand for labour, and consequently 
its price, must necessarily have increased with those improvements. 

“The inferiority of oatmeal is again insisted on below, p. i6o. 

Authorities are quoted below, pp. 240. 



In the last ccnti;ry, accordingly, as well as in the* present, the wages 
of labour were higher in England than in Scotland. They have risen 
too considerably since that time, though, on account of the greater* 
variety of wages paid there in different places, it is more diftlcult to 
ascertain how much. In i6r4, the pay of a foot soldier was the same 
as in the present times, eight pence a day.®** When it was first 
established it would naturally be regulated by the usual wages of 
common labourers, the rank of people from which foot soldiers are 
commonly drawn. Lord (.'hief Justice Hales,'" who wrote in the 
time of Charles II. computes the neces.sary expence of a labourer's 
family, consisting of six persons, the father and mother, two chil- 
dren able to do something, and two not able, at ten shillings a week, 
or twenty-si.x pounds a year. If they cannot earn this by their 
labour, they must make it up. he .supposes, either by begging or 
stealing. He ajipears to have enquired very carefully into this sub- 
ject.'*'" In t688, IMr. Gregory Kmg, whose skill in political arith- 
metic is so much extolled by Doctor Davenant,^‘‘“ computed the 
ordinarj’ income of labourers imd out-serx-ants to be fifteen pounds 
a year to a family, which he supposed to consist, one with another, 
of three and a half persons.'**' His calculation, therefore, though 
different in appearance, corresponds very nearly at bottom with 
that of judge Hales. Both the weekly expence of such fam- 
ilies to be about twenty pence a head. Both the pecuniary income 
and expcncc of such families have increased considerably since that 
time through the greater part of the kingdom ; in some places more, 
and in some less; though perhaps scarce any where so much as 
some exaggerated accounts of the pre.sent wages of labour have 
lately repre.sented them to the public. The price of labour, it must 
be observed, cannot be a.scertalned very accurately any where, 
different prices being often paid at the same place and for the same 
sort of labour, not only according to the different abilities of the 
workmen, but according to the easiness or hardness of the masters. 
Where wages aiy not regulated by law, all that we can pretend to 
determine is what are the usual; and ex[)eriencc seems to 

“Hume, History, ed. of 1773, vol. vi., p. 178, quolinj; Uymer’s Foedera, 
tom. xvi., p. 717. This was for service in Germany. 

Sir Matthew H.alc. 

^ Sec his scheme for the maintenance of the Poor, in Burn’s History of the 
Poor-laws. This note appears first in cd. 2. Hale’s Discourse Touching Pro- 
vision jar the Poor was [irinted in 1683. Jt contains no evidence of the 
careful inquiry attributed to it above. 

“Davenant, Essay upon the probahlr Methods of Making a People Gainers 
in the Balance of Trade, i6gi), pp. 15, 16; in Works, ed. Whitworth, vol. ii., 
P- I 7 S- 

"Scheme D in Davcnanl, Balance of Trade, in Works Scheme B, vol. ii., p. 
184. See below, p. 196, note. 

78 the wealth of NATIONS 

show that law call never regulate them properly, though it has 

often pretended to do so. 

* The real recoinpence of labour, the real quantity of the neces- 
saries and conveniencies of life which it can procure to the labourer, 
has, during the course of the present century, increased perhaps in 
a still greater proportion than its money price. Not only grain has 
become somewhat cheaper, but many other things, from which the 
industrious poor derive an agreeable and wholesome variety of 
food, have become a great deal cheaper. Potatoes, for example, do 
not at present, through the greater part of the kingdom, cost half 
the price which they used to do thirtj' or forty years ago. The same 
thing may be said of turnips, carrots, cabbages ; things which were 
formerly never raised but by the spade, but which are now com- 
monly raised by the plough. .Vll sort of garden stuff too has become 
cheaper. The greater part of the apples and even of the onions 
consumed in Great Britain were in the last century imported from 
Flanders. The great improvements in the coarser manufactures of 
both linen and woollen cloth furnish the labourers with cheaper 
and better cloathing; and those in the manufactures of the coarser 
metals, with cheaper and better instruments of trade, as well as 
with many agreeable and convenient pieces of household furniture. 
Soap, salt, candies, leather, and fermented liquors, have, indeed, 
become a good deal clearer ; chiefly from the taxes which have been 
laid upon them, The quantity of, however, which the labour- 
ing poor are under any necessity of consuming, is so very sm.'dl, 
that the increase in their price does not compensate the diminution 
in that of so many other things. The common complaint that lux- 
ury extends itself even to the low'Csl ranks of tlie people, and that 
the labouring poor will not now' be contented with the same food, 
cloathing and lodging which satisfied them in former times, may 
convince us that it is not the money price of labour only, but its 
real recompence, which has augmented. 

Is this improvement in the circumstances of the lower ranks of 
the people to be regarded as an advantage or as an iiiconvenicncy to 
the society? •*'’ The answer seems at first sight abundantly jilain. 
Servants, labourers and workmen of different kinds, make up the 
far greater part of every great political society. But what improves 
the circumstances of the greater part can never be regarded as an 

“’Berkeley, Qurriit, 5th cd., 1732, qu. 2, asks “whether a people can be 
called poor where the common sort arc well fed, clothed and lodRud.” Hiime, 
Commerce," says: “The greatness of a state and the happiness of its 
subjects, however independent they may be supposed in some respects, are 
Mmmonly allowed to be inseparable with regard to commerce ." — Political 
Discourses, 1732, p. 4. 


inconveniency t(\ the whole, society can surely be flourishing 
and happy, of which the far greater part of the member.'; are poor 
and miserably It is but equity, besides, that thej' who feed, cloath * 
and lodge the whole body of the people, should have such a .share 
of the produce of their own labour as to be themselves tolerably 
well fed, cloathed and lodged. 

Poverty, though it no doubt discourages, does not always prevent 
marriage. It seems even to be favourable to generation. A half- 
star\-ed Highland woman frequently bears more than twenty chil- 
dren, while a pampered fine lad}’ is often incapable of l)earing any, 
and is generally e.vhausted by two or three. Barrenness, so frequent 
among women of fa.shion, is very rare among of inferior sta- 
tion. Luxury in the fair sex, while it inflames perhaps the passion 
for enjoyment, seems always to weaken, and frequently to destroy 
altogether, the powers of generation. 

But poverty, though it does not prevent the generation, is ex- 
tremely unfavourable to the rearing of children. The tender plant 
is produced, but in so cold a soil, and so severe a climate, soon 
withers and dies. It is not uncommon, I have been frequently told, 
in the Highlands of Scotland for a mother who has borne twenty 
children not to have two alive. Several officers of great experience 
have assured me, that To far from recruiting their regiment, they 
have never been able to supply it with drums and fifes from all the 
.soldiers’ children that were born in it. A greater number of fine chil- 
dren, how’ever, is .seldom seen any where than about a barrack of 
soldiers. Very few of them, it seems, arrive at the age of thirteen or 
fourteen. In some places one half the children born die before they 
are four years of age; in many places before they are seven; and in 
almost all places before they are nine or ten. This great mortality, 
however, will every where be found chiefly among the children of 
the common people, who cannot afford to tend them with the same 
care as those of better station. Though their marriages are generally 
more fruitful thajj those of people of fa.shion, a smaller proportion 
of their children arrive at maturity. In foundling ho.spitals, and 
among the children brought up by parish charities, the mortality 
is still greater than among those of the common people. 

Every r.pecies of animals naturally multiplies in proportion to 
the means of their subsistence, and no species can ever multiply 
beyond it. But in civilized society it is only among the inferior 
ranks of people that the scantiness of sub.sistence can set limits 
to the further multiplication of the human species; and it can do 
so in no other way than by destroying a great part of the children 
which their fruitful marriages produce. 



The liberal rew’hrd of labour, by enablitij; Iheio to ()rovitle bet- 
ter for their children, and consequently to bring up a greater num- 
'ber, naturally tends to widen and extend those limits. Tt deserves 
to be remarked too, that it necessarily doe.s this as ntaily as pos- 
sible in the proportion which the demand for labour requires.-*'* If 
this demand is continually increasing, the reward of lal'-mr must 
necessarily cncour.ige in such a manner the marii;ig<» ami m.’''i 
plication of labourers as may enable them to supply that continu- 
ally increasing demand by a continually increasing poinilation If 
the reward should at any time be less than what was requisite for 
this purpose, the deficiency of hands would soon raise it: and if it 
should at any time be more, their excessive multiplication would 
soon lower it to this ncccssarj' rate. The market wtmld be so miuh 
under-stocked with labour in the one case, and so much over- 
stocked in the other, as would soon force back its price t(j that 
proper rate which the circumstances of the society required. It is 
in this manner that the demand for men, like that for any othei 
commodity, nece.s.sarlly regulates the production of men; ciuirkens 
it when it goes on too slowly, and stops it when it advances hm 
fast. It is this demand which regulates and determines the slate of 
propagation in all the different countries of the world, hi Nuith 
America, in Europe, and in China; which renders it rapidly jiro- 
gres.sive in the first, slow and gradual in the .second, and altogether 
stationary in the'” 

The wear and tear of a slave, it has been said, is at the e.xpeni e 
of his master; but that of a free servant is at his own e.xpcnce. The 
wear and tear of the latter, however, Ls. in reality, a.s much al tlie 
ex-pence of his master as that of the former. The wages i>aid lo 
journeymen and servants of every kind he .such as m;iy en.dile 
them, one with another, to continue the race of journeymen and 
servants, according as the increasing, diminishing, or station.-iry d'-- 
mand of the society may happen to re(|iiii-e. Hut though th(' 
and tear of a free servant he eciually at the exiience of his master, 
it generally costs him much less than that of a slave. The fimrl 
destined for replacing or repairing, if I may .say so, the wear and 

**” Cantijiun, m?, pi j , t h ix., title, “Le nnmbre de lubourcurs, artisans t-l 
autres qui trav.-iillent un ^lat &e proportionnu nalurellenicnt au besuin 
qU' On en a ” 

" Ed. 1 reads ‘‘II it,” 

Q’li'riil, qu. 6 j, asks “whether a rounlry inhabited by people 
well fed, clothed and lodged would not become every d.iy more populous? 
And whether a numerous stock of people in such circumstances would nol 
constitute a flourishing nation?” 

Ecl.^ 1 reads ‘tear and wear” here and in the three other cases where the 
pnraso'is used in this paragraph. 


tear of the dave, ii- Lotumoul> tuaiiageil by a negligent master or 
careless overseer. 'I'hat destined foi performing the same office with 
regard to the free man. is managed by the free man himself. The * 
disoulers which generally prevail in the asronomy of the rich, 
natur.illy introduce themselves into the management of the ft'rmer: 
The strict frugality and parsimonious attention of the poor as 
naturally them.seivcs in that of the latter. Under such dif- 
ferent management, the same purpise must recgiire vcrj' different 
degrees of expence to execute it.lU appears, accordingly, fr^nn the 
experience of all ages and nation' T believe, that the work done by 
freemen comes cheaper in the end than that performed by slaves. 

It is f(Hind U) do so even at Bi»ston, Xe\v \'ork, and Philadelphia, 
where the wages of common labour are so very high. 

The liberal reward of },^b()ltr, therefore, as it is the effect of in- 
creasing wea.lth, so it is the cause of increasing population. To 
compkiin of it. is to lament over the necessary effect and cause of 
the greatest public prosperity. 

It deserves to be remaiked, perhaps, that it is in the progressive 
state, while the society i< advancing to the further acquisition, 
rather than when it has acquired its full complement of riches, that 
the condition of the lahouriug poor, of the great body of the people, 
seems to be the happiest and the most comfortable- It is hard in 
the stationary, and miserable in the declining slate.|The progres- 
sive slate i.s ill reality the cheerful and the hearty state to all the 
different orders of the society. The stationary is dull; the declining 

The liberal reward of labour, as it cncourage.s the propagation, 
so it increases the industry of the common people. The wages of 
labour are the encouragement of industry, which, like every other 
human quality, improves in proportion to the encouragement it 
receh’os. A plentiful .subsistence increases the bodily strength of the 
labourer, and the comfortable hope of bettering his condition, and 
of ending his di^’s perhaps in ease and plenty, animates him to 
exert that strength to the utmost. WTiere wages are high, accord- 
ingly, we shall always find the workmen more active, diligent, and 
expeditious, than where they are low; in Kngland, for example, 
than in Scotland ; in the neighbourhood of great towns, than in re- 
mote country places. Some workmen, indeed, when they can earn 
in four days what will maintain them through the week, will be idle 
the other three. This, however, is by no means the case with the 
greater part.^® Workmen, on the contrary, when they are liberally 
paid by the piece, are very apt to over-work themselves, and to nlin^;; 

" This is a more favourable view than that taken in Lecturts, p. 357-. - 



their health and constitution in a few years. A carpenter in London, 
and in some other places, is not supposed to last in his utmost 
’ vigour above eight years. Something of the same kind happens in 
many other trades, in which the workmen are paid by the piece; 
as they generally are in manufactures, and even in country labour, 
wherever wages are higher than ordinary. Almost every class of 
artificers is subject to some peculiar infirmity occasioned by ex- 
cessive application to their peculiar species of work. Ramuzzini, an 
eminent Italian physician, has written a particular book concern- 
ing such diseases.'*'* We do not reckon our soldiers the most indus- 
ftrious set of people among us. Yet when soldiers have been em- 
ployed in some particular sorts of work, and liberally paid by the 
piece, their officers have frequently been obliged to stipulate with 
the undertaker, that they should not be allowed to earn above a 
certain sum evety day, according to the rate at which they were 
paid. Till this stipulation was made, mutual emulation and the de- 
sire of greater gain, frequently prompted them to over-work them- 
selves, and to hurt their health by excessive labour. Excessive 
application during four days of the week, is frequently the real 
cause of the idleness of the other three, so much and so loudly com- 
plained of. Great labour, either of mind or body, continued for 
several days together, is in most men naturally followed by a great 
desire of relakation, which, if not restrained by force or by some 
strong necessity, is almost irresistible. It is the call of nature, which 
requires to be relieved by some indulgence, sometimes of ease only, 
but sometimes too of dissipation and diversion. If it is Hot complied 
with, the consequences are often dangerous, and sometimes fatal, 
and such as almost always, sooner or later, bring on the peculiar 
infirmity of the trade. If masters would always listen to the dictates 
of reason and humanity, they have frequently occasion rather to 
moderate, than to animate the application of many of their work- 
men. It will be found, I believe, in every sort of trade, that the man 
who works so moderately, as to be able to work constantly, not only 

preserves his health the longest, but, in the course of the year, exe- 
cutes quantity of work. 

In cheap ijs pretended, workmen are generally more idle, 

and in de^&ieg '^re industrious than ordinary. A plentiful sub- 

sistence therefore, it has been concluded, relaxes, and a scanty one 
quickens their industry. That a little more plenty than ordinary 

may render some workmen idle, cannot well be doubted; but that 
it should have this effect upon the greater part, or that men in 

** De morbis artificum diatriba, 1700, translated into English (4 Treatise 
on the Diseases of Tradesmen) by R. James, 1746. 


general should work better when they are ill fed than when they 
are well fed, when they are disheartened than when they are in 
good spirits, when they are frequently sick than when they are* 
generally in good health, seems not very probable. Years of dearth, 
it is to be observed, are generally among the common people years 
of sickness and mortality, which cannot fail to diminish the pro- 
duce of their industry. 

In years of plenty, servants frequently leave their masters, and 
trust their subsistence to whatlthey can make by their own in- 
dustry. But the same cheapness of provisions, by increasing the 
fund which is destined for the maintenance of servants, encourages 
masters, farmers especially, to employ a greater number. Farmers 
upon such occasions expect more profit from their corn by main- 
taining a few more labouring serv'ants, than by selling it at a low 
price in the market. The demand for servants increases, while the 
number of those who offer to supply that demand diminishes. The 
price of labour, therefore, frequently rises in cheap years. 

In years of scarcity, the difficulty and uncertainity of subsist- 
ence make all such people eager to return to service. But the high 
price of provisions, by diminishing the funds destined for the main- 
tenance of servants, disposes mastero rather to diminish than to 
increase the number of tho«e they have. In dear years too, poor in- 
dependent workmen frequently consume the little stocks with 
which they had used to supply themselves with the materials of 
their work, and are obliged to become journeymen for subsistence. 
More people want employment than can easily get it; many are 
willing to take it upon lower terms than ordinary, and the wages 
of both servants and journeymen frequently sink in dear years. 

blasters of all sorts, therefore, frequently make better bargains 
with their servants in dear than in cheap years, and find them more 
humble and dependent in the former than in the latter. They 
naturally, therefore, commend Bm^^former as more favourable to 
industry. Landlords and farmw^^esides, two of the largest classes 
of masters, have another reason for being pleased with dear years. 
The rents of the one and the profits of the other depend very much 
upon the price of provisions. Nothing can be more absurd, how- 
ever, than to imagine that men in general should work less when 
they work for themselves, than when they w'ork for other people.^A 
poor independent workman will generally be more industrious than 
even a journeyman who works by the piece. The one enjoys the 
whole produce of his own industry, the other shares it with his 
master. The one, in his separate independent state, is less liable 
to the temptations of bad company, which in large manufactories 

84 the wealth of NATIONS 

SO frequently rul» the morals of the other. The superiority of the 
independent workman over those servants who are hired by the 
•month or by tft year, ajid whose wages and maintenance are the 
same whether tqpy do much or do little, is likely to be still greater. 
Cheap years tend to increase the proportion of independent work- 
men to journeymen and servants of all kinds, and dear years to 
diminish it. 

A French author of great knowledge and ingenuity, hir. hlcs- 
sance, receiver of the tailles in the election of St. Etienne, en- 
deavours to show that the poor do more work in cheap than in 
dear years, by comparing the quantity and value of the goods made 
upon those different occasions in three different manufactures; one 
of coarse woollens carried on at Elbeuf; one of linen, and another 
of silk, both which extend through the whole generality of Rou- 
en.^® It appears from his account, which is copied from the registers 
of the public offices, that the quantity and value of the goods made 
in all those three manufactures has generally been greater in cheap 
than in dear years; and that it has always been in the 
cheapest, and least in the dearest years. All the three seem to be 
stationary manufactures, or which, though their produce may vary 
somewhat from year to j’ear, are upon the w’hole neither going back- 
wards nor forAvards. 

The manufacture of linen in Scotland, and that of coarse wool- 
lens in the west riding of Yorkshire, are growing manufactures, of 
which the produce is generally, though with some variations, in- 
creasing both in quantity and value. Upon examining, however, the 
accounts which have been published of their annual produce, T 
have not been able to observe that its variations have had any 
sensible connection with the dearness or cheapness of the sea'^nn-.. 
In 1740, a year of great scarcity, both manufacture.s, indeed, ap- 
pear to have declined very considerably. But in 17 •56. another year 
of great scarcity, the Scotch manufacture made more than ordi- 
nary advances. The Yorkshire manufacture, inde®i. declined, and 
its produce did not rise to what it had been in 1755 till 1766. after 
the repeal of the American stamp act. In that and the following 
year it greatly exceeded what it had ever been before, and it has 
continued to advance ever since. 

The produce of all great manufactures for distant sale mus*' 
“Misprinted “taillies” in eds. 3-5. 

Recherckes sur la population des giniralitis d’Auvergne, de Lvon, de 
Kouen, et de ijuelques provinces et vittes du royaume, avec des riftexion\ u,/ 
^ France gu’en Angleterre, depuh 1674 iusqu'en 1764, 

par M. Messance, rece«eur des tailles de I’elertion de Saint-Etienne, 1766, pp. 
287-292, 30S-308. I / I 

“Ed. I reads “continued to do so.” 


necessarily depend, not so much upon the dearness or cheapness of 
the seasons in the countries where they are carried on, as upon the 
circumstances which affect the demand in-the counfrics where they 
are consumed; upon peace or war, upon the prosperity or declen- 
sion of other rival manufactures, and upon the good or bad humour 
of their principal customers. A great part of the extraordinary 
work, besides, which is probably done in cheap years, never enters 
the public registers of manufactures. The men servants who leave 
their masters become independent labourers. The women return to 
their parents, and commonly spin in order to make cloaths for 
themselves and their families. Even the independent workmen do 
not always work for public .sale, but are employed by some of their 
neighbours in manufactures for family use. The produce of their 
labour, therefore, frequently makes no figure in those public reg- 
isters of which the records are sometimes published with so much 
parade, and from which our merchants and manufacturers would 
often vainly pretend to announce the prosperity or declension of 
the greatest empires. 

Though the variations in the price of labour, not only do not al- 
ways correspond wth those in the price of provisions, but are 
frequently quite opposite, we must not. upon this account, imagine 
that the price of provisions has no influence upon that of labour. 
The money price of labour is necessarily regulated by two circum- 
stances;. Ihe. demand Jorjabour, and thejjrice of _the. necessaries 
land conveniencies of life. The demand for labour, according as it 
happens to be increasing, .stationary, or declining, or to require an 
increasing, stationary, or declining population, determines the 
quantity of the necessaries and conveniencies of life which must 
be given to the labourer; and the money price of labour is de- 
termined by what is requisite for purchasing this quantity. Though 
the money price of labour, therefore, is sometimes high where the 
price of provisions is low, it would be still higher, the demand con- 
tinuing the same, if the price of provisions was high. 

It is because the demand for labour increases in years of sudden 
and extraordinary plenty, and diminishes in those of sudden and 
extraordinary scarcity, that the money price of labour sometimes 
rises in the one, and sinks in the other. 

In a year of sudden and extraordinary plenty, there are funds in 
the hands of many of the employers of industry, sufficient to main- 
tain and employ a greater number of industrious people than had 
been employed the year before; and this extraordinary number 
cannot always be had. Those masters, therefore, who want more 
workmen, bid against one another, in order to get them, which 

86 IHE wealth of NATIONS 

sometimes raises both the real and the money price of their labour. 

The contrary of this happens ffi a year of sudden and extraor- 
• dinary scarcity. The funds destined for employing industry are less 
than they had been the year before. A considerable number of peo- 
ple are thrown out of employment, who bid against one another, in 
order to get it, which sometimes lowers both the real and the money 
price of labour. In 1740, a year of extraordinary scarcity, many 
people were willing to work for bare subsistence. In the succeeding 
years of plenty, it was more difficult to get labourers and servants. 

The scarcity of a dear year, by diminishing the demand for la- 
bour, tends to lower its price, as the high price of provisions tends 
to raise it. The plenty of a cheap year, on the contrary, by increas- 
ing the demand, tends to raise the price of labour, as the cheapness 
of provisions tends to lower it. In the ordinary variations of the 
price of provisions, those two opposite causes seem to counterbal- 
ance one another; which is probably in part the reason why the 
wages of labour are every-where so much more steady and per- 
manent than the price of provisions. 

The increase in the w'ages of labour necessarily increases the 
price of many commodities, by increasing that part of it which re- 
solves itself into wages, and so far tends to diminish their consump- 
tion both at home and abroad. The same cause, however, which 
raises the wages of labour, the increase of stock, tends to increase 
its productive powers, and to make a smaller quantity of labour 
produce a greater quantity of work. The owner of the stock which 
employs a great number of labourers, necessarily endeavours, for 
his own advantage, to make such a proper division and distribution 
of employment, that they may be enabled to produce the greatest 
quantity of work possible. For the same reason, he endeavours to 
supply them with the best machinery which either he or they can 
think of. What takes place among the labourers in a particular 
workhouse, takes place, for the same reason, among those of a 
great society. The greater their number, the more they naturally 
divide themselves into different classes and subdivisions of employ- 
ment. More heads are occupied in inventing the most proper ma- 
chinery for executing the work of each, and it is, therefore, more 
likely to be invented. There are many commodities, therefore, 
which, in consequence of these improvements, come to be produced 
b^ so much less labour than before, that the increase of its price 
is more than compensated by the diminution of its quantity .■** 

_ “ Ed. I reads “that the increase of its price does not compensate the dim- 
mution of its quantity.” The meaning b that the increase in the amount paid 
for a given quantity of labour is more than counterbalanced by the diminu- 
tion in the quantity required. The statement is repeated below, p. 242, 243. 



The rise and fall in the profits of stock depend upon the same 
causes with the rise and fall in the wages of labour, the increasing 
or declining state of the wealth of the society; but those causes 
affect the one and the other very differently. 

The increase of stock, which raises wages, tends to lower profit. 
When the stocks of many rich merchants are turned into the same 
trade, their mutual competition naturally tends to lower its profit; 
and when there is a like increase of stock in all the different trades 
carried on in the some society, the same competition must produce 
the same effect in them all.^ 

It is not easy, it has already been observed, to ascertain what are 
the average wages of labour even in a particular place, and at a 
particular time. We can, even in this case, seldom determine more 
than what are the most usual wages. But even this can seldom be 
done with regard to the profits of stock. Profit is so very fl uctuat- 
ing, that the person who carries on a particular trade cannot always 
Wyou himself what is the average of his annual profit. It is af- 
fected, not'only by every variation of price in the commodities 
which he deals in, but by the good or bad fortune both of his 
rivals and of his customers, and by a thousand other accidents to 
which goods wheji carried either by sea or by land, or even when 
^red in a warehouse, are liable. It varies, therefore, not only from 
ySar^to year, but from day to day, and almost from hour to hour. 
To ascertain what is the average profit of all the different trades 
carried on in a great kingdom, must be much more difficult; and to 
judge of what it may have been formerly, or in remote periods qf 
time, with any degree of precision, must be altogether impossible. 

^This statement is somewhat amplified below, p. 336, where the increas- 
ing intensity of the competition between the owners of capital is attributed 1 
to the gradually increasing difficulty of finding “a profitable method of en;-^ 
ploying any new capital.” 


SS the wealth of nations 

But though it may be impossible to determine with any degree 
of precision, what are or were the average profits of stock, eithei 
in the present, or in ancient times, some notion may be foimed ol 
them from the interest of money ■ It may be laid down as a ma\im 
that wheiever a great deal can be made by the use of money, a 
great deal will commonly be given for the use of it, and that wher- 
ever little can be made by it, less will commonly be given for it ^ 
According, therefore, as the usual market rate of interest varies in 
any country, w e may be assured that the ordinary profits of stock 
must vary with it, must sink as it sinks, and rise as it rises The 
progress of interest, therefore, may lead us to form some notion 
of the progress of profit 

By the 37th of Henry VIII * all interest above ten per cent was 
declared unlawful. More, it seems, had sometimes been taken be- 
fore that. In the leign of Edwaid VI. religious zeal piohibited all 
interest'"’ This piohibition, hoviever, like all otheis of the same 
kind, is said to have produced no effect, and probably rather in- 
creased than dinimished the evil of usury The statute of Henry 
VIII. was re\ived by the 13th of Elizabeth, cap. 8.® and ten per 
cent, continued to be the legal rate of interest till the 21st of Jcime^ 
I.'^ when it w'as restricted to eight per cent It was reduced to si\ 
per cent, soon after the restoration,'* and by the rath of Queen 

” Defined abo\ e, p 52 

•But that inteiL-t will not alwai-i bear the s.ame proportion to piofit i' 
recognised below , pp 96,97 

* C 9 ‘ an act aguin-t U'-ur\ ” On the ground that picviou-. \cts and liw' 
had been obscuie it repeal-, them all, and prohibils the rcpurch.i'-c ol good' 
sold within three months betorc, and the obtaining bj an\ dc\ice mou thin 
10 per cent per annum for lorbeanng pi\mint ol raont^ Its real ilftct wa' 
to legalise mtere-t up to 10 per cent 

°S & 6 Ed M, c 20, forbide all interc>-t and repelled 37 Hen Mil i 
9, alleging in its preamble that that \et wa' not intinded to allow uswe, i-, 
“divers persons blinded with inordiniti lo\c ol thcms.Ki-’ iinimnul hut 
was intended against all usurv and ict neeeithelcs-, the smit w is h\ thi 
said act permitted for the avoiding of a moic ill and ineonvenieiiee tint bi 
foie that time was used " 

'On the ground that s&.6rd M,c 20, hath not'dom -.o mueh good 
as was hoped it should but rither the said \iee of U'urv and esi'Cen'K In 
way of sale of wares and shuts of intiiest huh much mori eveenlingh 
abounded to the utter undoing of many gentlcmin merchant' occupicis and 
other ’’ 

C 17, which alleges that the fall of piiecs which had taken place made 
the maintenance of “so high a rate” as 10 per cent prejudicial to agricultuie 
and commerce, and thcrefoie reduces the mi\imum to S per cent foi the fu 
turc It concludes w ith the \ cry empU prov iso that “no w ord' in this 1 iw 
contained shall be constiued 01 c\poundcd to .illow the practiec 01 ii'iirv in 
point of religion or conscience ” 

It had alreadv been so reduced by a Commonwealth Aet ol Parliament, 
passed in August, 1631, which adopts the reasons given by 21 Jac I , c 17 
But of course this, hke other Acts of the Commonwealth, had to be ignored 


Anne,” to five per cent. All these different statutory regulations 
seem to have been made with great propriety. They seem to have 
followed and not to have gone before the market rate of interest, or . 
the rale at which people of good credit usually borrowed. Since the 
time cf Queen Anne, five per cent, seems to have been rather above 
than below the market rate. Before the late war,*” the government 
borrowed at three per cent.; ** and people of good credit in the 
:apital, and in many other parts of the kingdom, at three and a 
half, four, and four and a half per cent. 

Since the time of Henry VHI. the wealth and revenue of the 
country have been continually advancing, and, in the course of 
their progres.s, their pace seems rather to have been gradually ac- 
celerated than retarded. They seem, not only to have been going on, 
but to have been going on faster and faster.'- The wages of labour 
have been continually increasing during the same period, and in 
the greater part of the different branches of trade and manufac- 
tures the profits of stock have been diminishing. 

It generally requires a greater stock to carrj' on any sort of trade 
in a 'great town than in a country village. The great stocks em- 
ployed in every branch of trade, and the number of rich com- 

by the Restoration Parli.iment, which, by 12 Car. II., c. i.^, re-made the rr- 
ftuction on the itrotmds. tliat the abatement of interest from 10 per cent, “in 
former timivs hath been found by notable expeiiencc beneficial to the ad- 
vancement of trade and improvement of lands by good husbandry, with 
many other con-ider.tble advantages to this nation, especially the reducing 
of it to a nearer jiroportion with foreign states with whom we traffic," and 
because “in fresh memory tlic like fall from eight to six in the hundred by a 
hue constant practice hath found the like success to the general contentment 
of this nation as is visible by several improvements,” while “it is the en- 
deavour of some at present to reduce it back again in practice to the allow- 
ance of the statute still in force to eight in the hundred to the great discour- 
agement of ingenuity and industry in the husbandry trade and commerce of 
this nation.” 

"By 12 .^nn. st. 2, c. 16, which speaks of the benefit to trade and agricul- 
ture resulting from the earlier reductions, of the burdens which the war had 
laid on landowners, and of the decay of foreign trade owing to the high in- 
terest and profit of money at home, which things made it “absolutely neces- 
sary to reduce the fligh rate of interest” to a nearer proportion with the in- 
terest allowed in foreign states. 

‘"That of 1756-176,!. 

“ Holders of 4 per cent, annuities who declined to accept in exchange new 
stock bearing interest for some years at 3^ and afterwards at 3 per cent. * 
were paid off by means of money raised by a 3 per cent, loan in 1750. See 
Sinclair, History of the Public Revenue, 1785, pt. ii., p. 113. From that time 
till the beginning of 1735 the 3 per cents, were usually above par. Then they 
gradually sank to 63 in January. 1762; rose to 96 in March, 1763; fell again 
to So in October, 1764; after that they were seldom above go before the pub- 
lication of the Wealth of Nations (Sinclair, op. cit., pt. iii., 1790, Appendix 
iii.) . The policy of a legal regulation of interest is discussed below, pp. 339, 

’“Below, pp. 327, 328. 


countries where the rate of interest is higher than jn their own, are 
circumstances which no doubt demonstrate the redundancy of their 
stock, or that it has increased beyond what they can employ with 
tolerable profit in the proper business of their own country: but 
they do not demonstrate that that business has decreased. As the 
capital of a private man, though acquired by a particular trade, 
may increase beyond what he can employ in it, and yet that trade 
continue to increase too; so may likewise the capital of a great 

In our North American and West Indian colonies, not only the 
wages of labour, but the interest of money, and consequently the 
profits of stock, are higher than in England. In the different col- 
onies both the legal and the market rate of interest run from six to 
eight per cent. High wages of labour and high profits of stock, how- 
ever, are things, perhaps, which scarce ever go together, except in 
the peculiar circumstances of new colonies. A new colony must al- 
ways for some time be more under-stocked in proportion to the 
extent of its territory, and more under-peopled in proportion to the 
extent of its stock, than the greater part of other countries. They 
have more land than they have stock to cultivate. What they htive, 
therefore, is applied to the cultivation only of what is most fertile 
and most favourably situated, the land near the sea shore, and 
along the banks of navigable rivers. Such land too is frequently 
purchased at a price below the value even of its natural produce. 
Stock employed in the purchase and improvement of such lands 
must yield a very large profit, and consequently afford to pay a 
very large interest. Its rapid accumulation in so profitable an em- 
ployment enables the i)lanter to increase the number of his hands 
faster than he can find them in a new settlement. Those whom he 
can find, therefore, are very liberally rewarded. As the colony in- 
creases, the profits of stock gradually When the most 
fertile and best situated lands have been all occupied, le.s.s profit 
can be made by the cultivation of what is inferior both in soil and 

of the Public Funds, 7th pel., 1824, p. 229, quotes ".in account ilrawn up in 
the year 17C2, showing how much of the several funds transferable .it the 
Bank of England then stood in the namc.s of foreigners," which is aBo in 
Sinclair, History of the Public Revenue, pt. iii., 1700, p. 366. From this it 
appear^ that foreigners held £4,627,858 of Bank stock and £10,528,557 in the 
other fund', which did not include South Sea and East India stock. Fairman 
hid reason to believe that the South Sea holding amounted to £2,500,000 and 
the East Indian to more than £500,000, which would make in all about 
£18,000,000. In 1806, he says, the total claiming exemption from income tax 
(foreigners were exempt) was £18,500,000, but this did not include Bank 

“Eds. 1-3 read “lands.” 


situation, and le,ps interest can be afforded fur the stock which is 
so L-niployed. In the greater part of our colonics, accordingly, both 
the legal and the market rate of interest have been considerably re- * 
duced during the course of the present century. As riches, improve- 
ment, and population have increased, has declined. The 
wages of labour do not sink with the profits of stock. The demand 
for labour increases with the increase of stock whatever be its' 
profits; and after these arc diminished, stock may not only con- 
tinue to increase, but to increase much faster than before. It is with 
industrious nations who arc advancing in the acquisition of riches, 
as with industrious individuals. A great stock, though with small 
profits, generally increases faster than a small stock with great 
profits. Money, say^ the proverb, makes money. When you have 
got a little, it is often easy to get more. The great difficulty is to get 
that little. The connection between the increase of stock and that 
of industry, or of the demand for useful labour, has partly been 
explained already but will be explained niore fully hereafter in 
treating of the accumulation of stock. 

The acquisition of new territory, or of new branches of trade, 
may sometimes raise the profits of stock, and mth them the interest 
of money, even in a country which is fast advancing in the acqui- 
sition of riches. The stock of the country not being sufficient for the 
whole accession of business, which such acquisitions present to the 
different people among whom it is divided, is applied to those par- 
ticular branches only which afford the greatest profit. Part of what 
had before been employed in other trades, is necessarily withdrawn 
from them, and turned into some of the new and more profitable 
ones. In all those old trades, therefore, the competition comes to be 
less than before. The market comes to be fully supplied with 
many different sorts of goods. Their price necessarily rises more or 
less, and yields a greater profit to those who deal in them, who can, 
therefore, afford to borrow at a higher interest. For some time after 
the conclusion o{ the laic war, not only private people of the best 
credit, but some of the greatest companies in London, commonly 
borrowed at five per cent, who before that had not been used to pay 
more than four, and four and a half i)er cent. The great accession 
both of territory and trade, by our acquisitions in North America 
and the IVest Indies, will sufficiently account for this, without sup- 
posing any diminution in the capital stock of the society. So great 
an accession of new business to be carried on by the old stock, must 
necessarily have diminished the quantity employed in a great num- 
“Above, pp. 64-68. “Below, pp. 3I4-332' 



ber of particular Branches, in which the competitipn being less, the 
profits must have been greater. I shall hereafter have occasion to 
mention the reasons which dispose me to believe that the capital 
stock of Great Britain was not diminished even by the enormous 
expence of the late war. 

The diminution of the capital stock of the society, or of the 
funds destined for the maintenance of industry, however, as it low- 
ers the wages of labour, so it raises the profits of stock, and con- 
sequently the interest of money. By the wages of labour being 
lowered, the owners of what stock remains in the society can bring 
their goods at less expence to market than before, and less stock 
being employed in supplying the market than before, they can .sell 
them dearer.-" Their goods cost them less, and they get more for 
them. Their profits, therefore, being augmented at both ends, can 
well afford a large interest. The great fortunes so suddenly and so 
easily acquired in Bengal and the other settlements in the 
East Indies, may satisfy us that, as the wages of labour are very 
low, so the profits of stock are very high in those ruined countries. 
The interest of money is proportionably so. In Bengal, money is 
frequently lent to the farmers at forty, fifty, and sixty per cent, 
and the succeeding crop is mortgaged for the payment. As the 
profits which can afford such an interest must eat up the 
whole rent of the landlord, so such enormous usury must in its turn 
eat up the greater part of those profits. Before the fall of the Ro- 
man republic, a usury of the same kind seems to have been common 
in the provinces, under the ruinous administration of their procon- 
suls. The virtuous Brutus lent money in Cyprus at eight-and- 
forty per cent, as we learn from the letters of Cicero.-* 

In a country which had acquired that full complement of riches 
which the nature of its soil and climate, and its situation with re- 
spect to other countries, allowed it to acquire; which could, there- 
fore, advance no further, and which was not going backwards, both 
the wages of labour and the profits of stock w'oiild probably be very 
low. In a country fully peopled in proportion to what either its ter- 
ritory could maintain or its stock employ, the competition for em- 
ployment would necessarily be so great as to reduce the wages of 

“Below, pp. 328, 329, 881. “Eds. i and 2 re.-id “cheaper.” 

'“Ed. I reads “five and forty,” 8 having probably been misread as s- 

“Ad Allicum, VI., i., 3, 6. Cicero had arranged that a .■sk-ycar-old debt 
should be repaid with interest at the rate of 12 per cent, per annum, the 
principal being increased by that amount for each of the six years. This 
would have very nearly doubled the principal, but Brutus, through his 
agent, kept asking for 48 per cent., which would have multiplied it by more 
tl^ fifteen. However, Cicero asserted that the iz per cent, would have sat- 
isfied the cruellest usurers. 



labour to what was barely sufficient to keep up the number of la- 
bourers, and, the country being already fully peopled, that number 
could never be augmented. In a country fully stocked in proportion 
to all the business it had to transact, as great a quantity of stock 
would be employed in every particular branch as the nature and 
extent of the trade would admit. The competition, therefore, would 
every-where be as great, and consequently the ordinary profit as 
low as possible. 

But perhaps no country has ever yet arrived at this degree of 
opulence. China seems to have been long stationary, and had prob- 
ably long ago acquired that full complement of riches which is con- 
sistent with the nature of its laws and institutions. But this com- 
plement maj' be much inferior to what, with other laws and 
institutions, the nature of its soil, climate, and situation might ad- 
mit of. A country which neglects or despises foreign commerce, and 
which admits the vessels of foreign nations into one or two of its 
ports only, cannot transact the same quantity of business which it 
might do with different laws and institutions. In a country too, 
where, though the rich or the owners of large capitals enjoy a good 
deal of security, the poor or the owners of small capitals enjoy 
scarce any, but are liable, under the pretence of justice, to be pil- 
laged and plundered at any time by the inferior mandarines, the 
quantity of stock employed in all the different branches of business 
transacted within it, can never be equal to what the nature and ex- 
tent of that business might admit. In every different branch, the 
oppression of the poor must establish the monopoly of the rich, 
who, by engrossing the whole trade to themselves, will be able to 
make very large profits. Twelve per cent, accordingly is said to be 
the common intere.sts of money in China, and the ordinary profits 
of stock must be sufficient to afford this large interest. 

A defect in the law may sometimes raise the rate of interest con- 
siderably above what the condition of the country, as to wealth or 
poverty, would rfquire. When the law does not enforce the per- 
formance of contracts, it puls all borrowers nearly upon the same 
footing with bankrupts or people of doubtful credit in better regu- 
lated countries. The uncertainty of recovering his money makes the 
lender exact the same usurious interest which is usually required 
from bankrupts. Among the barbarous nations who over-ran the 
western provinces of the Roman empire, the performance of con- 
tracts was left for many ages to the faith of the contracting 
parties.*’’ The courts of justice of their kings seldom intermeddled 
in it. The high rate of interest which took place in those 

^Lectures, pp. 130-134. 


ancient times ma^ perhaps be partly accounted fqj' from this cause. 

When the law prohibits interest altogether, it does not prevent it. 
Many people must borrow, and nobody will lend without such a 
consideration for the use of their money as is suitable, not only to 
what can be made by the use of it, but to the difficulty and danger 
of evading the law. The high rate of interest among all Mahometan 
nations is accounted for by Mr. Montesquieu, not from their pov- 
erty, but partly from this,-® and partly from the difficulty of rc- 
Mvering the moneyc-' 

’ The lowest ordinary rate of profit must always be something 
more than what is sufficient to compensate the occasional losses to 
which every employment of stock is exposed. It is this surplus only 
which is neat or clear profit. 'What is called gross profit compre- 
hends frequently', not only this surplus, but what is retained for 
compensating such extraordinary losses. The interest which the 
borrower can afford to pay is in proportion to the clear profit only. 

The lowest ordinary rate of interest must, in the same manner, 
be something more than sufficient to compensate the occasional 
losses to which lending, even with tolerable prudence, is exposed. 
Were it not more, charity or friendship could be the only motives 
for lending. 

In a country which had acquired its full complement of riches, 
where in every particular branch of business there was the greatest 
quantity of stock that could be employed in it, as the ordinary rate 
of clear profit would be very small, so the usual market rate of in- 
terest which could be afforded out of it, would be so low as to 
render it impossible for any but the very wealthiest people to live 
upon the interest of their money. .All people of small or middling 
fortunes would be obliged to superintend themselves the employ- 
ment of their own stocks. It would be necessary that almost every 
man should be a man of business, or engage in some sort of trade. 
The province of Holland seems to be approaching near to this 
state. It is there unfashionable not to be a of business."® 
Necessity makes it usual for almost every man to be so, and custom 
every where regulates fashion. As it is ridiculous not to dress, so is 

7 .f , the danger of evading the law. 

'-’’Esprit des loi\, iiv. xxii., ch. 19, “L’usiirc augmente dans les pays ma- 
koirictans a propoition de la severite dc la defense: le preteur s’indemni'e du 
peril de I.i contravention. Dans ces pays d’Orient, la plupart des hommes 
n’ont rien d'a':.,urc; il n’y a presque point dc rapport entre la possession ac- 
tuclle d’une somme ct I’cspcrance dc la ravoir apres I’avoir pr£tcc: I’usure y 
augmente done a proportion du peril de I’insolvabilite.” 

“Joshua Gee, Trade and Navigation of Great Britain Considered, 1729, 
p. 128, notices the fact of the Dutch being all engaged in trade and ascribes 
it to the deficiency of valuable land. 


it, in some meas^ire, not to be employed, like other people. As a 
man of a civil profession seems awkward in a camp or a garrison, 
and is even in some danger of being despised there, so does an idle 
man among men of business. 

The highest ordinary rate of profit may be such as, in the price 
of the greater part of commodities, eats up the whole of what should 
go to the rent of the land, and leaves only what is sufficient to pay 
the labour of preparing and bringing them to market, according to 
the low'est rate at which labour can any-where be paid, the bare sub- 
sistence of the labourer. The workman always have been fed 
in some way or other while he was about the work ; but the land- 
lord may not always have been paid. The profits of the trade which 
the servants of the East India Company carry on in Bengal may 
not perhaps be very far from this rate.-” 

The proportion which the usual market rate of interest ought to 
bear to the ordinary rale of clear profit, necessarily varies as profit 
rises or falls. Double interest is in Great Britain reckoned, what the 
merchants call, a good, moderate, reasonable profit: terms which I 
apprehend mean no more than a common and usual profit. In a 
country where the ordinary rate of clear profit is eight or ten per 
cent., it may be reasonable that one half of it should go to interest, 
wherever business is carried on with borrowed money. The stock is 
at the risk of the borrower, who, as it were, insures it to the lender; 
and four or five per cent, may, in the greater part of trades, be both 
a sufficient profit upon the risk of this in.siirancc, and a sufficient 
recorapence for the trouble of employing the stock. But the pro- 
portion between interest and clear profit might not be the same in 
countries where the ordinary rate of profit was either a good deal 
lower, or a good deal higher. If it were a good deal lower, one half 
of it perhaps could not be afforded for interest; and more might be 
afforded if it w'ere a good deal higher. 

In countries which arc fast advancing to riches, the low raie of 
profit may, in the,price of many commodities, compensate the high 
wages of labour, and enable those countries to sell as cheap as their 
less thriving neighbours, among whom the wages of labour may be 

In reality high profits tend much more to raise the price of work 
than high wages. If in the linen manufacture, for example, the 
wages of the different working people, the flax-dressers, the spin- 
ners, the weavers, &c. should, all of them, be advanced two pence a 
day; it would be necessary to heighten the price of a piece of linen 
only by a number of two pences equal to the number of people that 

“ See below, pp. 603-605. 

98 the wealth of NATIONS 

had been employed about it, multiplied by the, number of days 
during which they had been so employed. That part of the price of 
the commodity which resolved itself into wages would, through all 
the different stages of the manufacture, rise only in arithmetical 
proportion to this rise of wages. But if the profits of all the differ- 
ent employers of those working people should be raised five per 
cent, that part of the price of the commodity which resolved itself 
into profit, would, through all the different stages of the manufac- 
ture, rise in geometrical proportion to this rise of profit. The em- 
ployer of the flax-dressers would in selling his flax require an 
additional five per cent, upon the whole value of the materials and 
wages which he advanced to his workmen. The employer of the 
spinners would require an additional five per cent, both upon the 
advanced price of the flax and upon the wages of the spinners. And 
the employer of the weavers would require a like five per cent, both 
upon the advanced price of the linen yarn and upon the wages of 
the weavers. In raising the price of commodities the rise of wages 
operates in the same manner as simple interest does in the accumu- 
lation of debt. The rise of profit operates like compound interest.®" 
Our merchants and master-manufacturers complain much of the 
bad effects of high wages in raising the price, and thereby lessening 
the sale of their goods both at home and abroad. They say nothing 
concerning the bad effects of high profits. They are silent with re- 
gard to the pernicious effects of their own gains. They complain 
only of those of other people.®’^ 

” According to the view of the subject here set forth, if the three employ- 
ers each spend £ioo in wages and materials, and profits are at first 5 pet 
cent, and then rise to 10 per cent., the finished commodity must rise from 
£331 os, 3d. to £364 2S., while if, on the other hand, the wages rise from £100 
to £103, the commodity will only rise to £347 iis. 3d. It is assumed either 
that profits mean profits on turn-over and not on capital per annum, or else 
that the employers each have their capital turned over once a year. But even 
when one or other of these assumptions is granted, it is clear that the “simple 
mtercst” may easily be greater than the “compound," In the examples just 
given we doubled profits, but only added one-twentieth to wages. If we 
double wages and leave profits at $ per cent., the commodity should rise 
from £331 os. 3d. to £662 os. 6d. 

“ This paragraph is not in ed. i ; the epigram at the end, however, did not 
make its appearance here for the first time in ed. 2, since it occurs in a slightly 
less polished form below, p. 566. 



The whole of the advantages and disadvantages of the different 
employnicnts of labour and stock must, in the same neighbour- 
hood, be either perfectly equal or continually tending to equality. 
If in the same neighbourhood, there was any employment evidently 
either - more or less advantageous than the lest, so many people 
would crowd into it in the one case, and so many would desert it in 
the other, that its advantages would soon return to the level of 
other employments. This at least would be the case in a society 
where things were left to follow their natural course, where there 
was perfect liberty and where every man was perfectly free both 
to chuse what occupation he thought proper, and to change it as 
often as he thought proper. Every man’s interest would prompt himl 
(o seek the advantageous, and to shun the disadvantageous em-1 

Pecuniary wages and profit, indeed, are every-where in Europe 
extremely different according to the different employments of la- 
bour and stock. But this difference arises partly from certain cir- 
cumstances in the employments themselves, which, either really, or 
at least in the imaginations of men, make up for a small pecuniary 
gain in some, and counter-balance a great one in others; and partly 
from the policy di Europe, which no-where leaves things at perfect 

The particular consideration of those circumstances and of that 
policy will divide this chapter into two parts. 

^The general design of this chapter, as well as many of its details, was 
doubtless suggested by Cantillon, Essai, pt. i, chaps, vii. and viii. The first 
of these chapters is headed; “Le travail d'un laboureur vaut moins que celui 
d’un artisan,” and the second: “Les artisans gagnent les uns plus les autres 
moins scion les cas et les drconstances differentes." The second ends thus: 
"Par ces inductions et cent autres qu’on pourrait tirer dc I’expdrience ordi- 
laire, on peut voir facilcmcnt que la dilftoce de prix qu’on pare pour le 
'avail journalier cst fondee sur des raisons naturelles et sensibles.” 

“Ed. I reads "either evidently." “Above pp. S6, 62. 




Past i 

Jneqtiolities arming from the Nature of the Employments them- 

selves * 

The five following are the principal circumstances which, so far as 
I have been able to observe, make up for a small pecuniary gain 
in some employments, and counter-balance a great one in others: 
first, the agreeableness or disagreeableness of the employments 
themselves; secondly, the easiness and cheapness, or the difficulty 
and expence of learning them; thirdly, the constancy or incon- 
stant of employment in. them; fourthly, the small or great trust 
which must be reposed in those who exercise them; and fifthly, the 
probability or improbability of success in them. 

First, The wages of labour vary with the ease or hardship, the 
cleanliness or dirtiness, the honourableness or dishonourableness ot 
the employment. Thus in most places, take the year round, a jour- 
ne3mian taylor earns less than a journeyman weaver. His work is 
much easier. A journeyman weaver earns less than a journeyman 
smith. His work is not always easier, but it is much cleanlier. A 
journeyman blacksmith, though an artificer, seldom earns so much 
in twelve hours as a collier, who is only a labourer, does in eight. 
His work is not quite so dirty, is less dangerous, and is carried on in 
day-light, and above ground. Honour makes a great part of the re- 
ward of all honourable professions. In point of pecuniary gain, all 
things considered, they are generally under-recompensed, as I shall 
endeavour to show by and by.”’ Disgrace has the contrary effect. 
The trade of a butcher is a brutal and an odious business; but it is 
in most places more profitable than the greater part of common 
trades. The most detestable of all employments, that of public ex- 
ecutioner, is, in proportion to the quantity of work done, better 
paid than any common trade whatever. , 

Hunting and fishing, the most important employments of man- 
kind in the rude state of society, become in its advanced state their 

‘ The foregoing introductory paragraphs would learl a logical reader to 
expect part i of the chapter to be entitled: “Inequalities of pecuniary wages 
and profit which merely counterbalance inequalities of other advantages and 
disadvantages.” The rather obscure title actually chosen is due to the fact 
that nearly a quarter of the part is occupied by a discussion of three further 
conditions which must be present in ad^tion to “perfect freedom” in order 
to bring about the equality of total advantages and disadvantages. The chap- 
ter would havc been clearer if this discussion had been placed at the begin- 
ning, but it was probably an afterthought. 

‘Below, pp. 103-107. 


most agreeable amusements, and they pursue for pleasure what 
they once followe’d from necessity. In the advanced state of society, 
therefore, they arc all very poor people who follow as a trade, what 
other people pursue as a pastime. Fishermen have been so since the 
time of Theocritus. A poacher is every-where a very poor man in 
Great Britain. In countries where the rigour of the law' .suffers no 
poachers, the licensed hunter is not in a much better condition. The 
natural taste for those eniplojinents makes moie people follow 
them than can live comfortably by them, and the produce of their 
labotrr, in proportion to its quantity, ccuiies always too cheap to 
market to afford anything but the most scanty subsistence to the 
labourers. , 

Disagieeableness and disgrace affect the profits of stock i%,the 
same manner as the wages of labour. The keeper of an inn or tav- 
ern, who is never ma.ster of his own house, and who is exposed to 
the brutality of every drunkard, exercises neither a very agreeable 
nor a very creditable business. But there is .scarce any common 
trade in which a small stock yields so great a profit. 

Secondly, The wages I'f labour vary with the and cheap- 
ness, or the difficulty and expence of learning the business. 

When any expensive machine is erected, the c.vtraordinary work 
to be performed by it before it is worn out, it must be expected, will 
replace the capital laid out upon it, with at least the ordinary 
profits. A man educated at the cxpence of much labour and time to 
any of those employments which require extraordinary dexterity 
and skill, may he compared to one of those expensive machines. 
The w'ork which he learns to perform, it must be expected, over and 
above the usual wages of common labour, will replace to him the 
whole expence of his education, with at least the ordinary profits 
of an equally valuable capital. It must do this too in a reasonable 
time, regard being had to the very uncertain duration of human 
life, in the same manner as to the more certain duration of the ma- 

The difference*bctween the wages of skilled labour and those of 
common labour, is founded upon this principle. 

The policy of Europe considers the labour of all mechanics, arti- 
ficers, and manufacturers, as skilled labour; and that of all country 
labourers as common labour. It seems to suppose that of the former 
to be of a more nice and delicate nature than that of the latter. It fs 
SO perhaps in some cases; but in the greater part it is quite other- 

‘See IdylUum xxi. This merely describes the life of two poor fishermen. 
The note appears first in ed. 2 , 

’ Ed, I reads “its." 



wise, as I shall endeavour to shew by and by.® The laws and cus- 
toms of Europe, therefore, in order to qualify any person for exer- 
cising the one species of labour, impose the necessity of an appren- 
ticeship, thougji with different degrees of rigour in different places. 
They leave the other free and open to every body. During the con- 
tinuance of the apprenticeship, the whole labour of the apprentice 
belongs to his master. In the mean time he must, in many cases, be 
maintained by his parents or relations, and in almost all cases must 
be cloathed by them. Some money too is commonly given to the 
master for teaching him his trade. They who cannot give money, 
give time, or become bound for more than the usual number of 
years; a consideration which, though it is not always advantageous 
to the master, on account of the usual idleness of apprentices, is al- 
ways disadvantageous to the apprentice. In country labour, on the 
contrary, the labourer, while he is employed about the easier, learns 
the more difficult parts of his business, and his own labour maintains 
him through all the different stages of his employment. It is reason- 
able, therefore, that in Europe the wages of mechanics, artificers, 
and manufacturers, should be somewhat higher than those of com- 
mon labourers.*’ They are so accordingly, and their superior gains 
make them in most places be considered as a superior rank of 
people. This superiority, however, is generally very small; the 
daily or weekly earnings of journeymen in the more common sorts 
of manufactures, such as those of plain linen and woollen cloth, 
computed at an average, are, in most places, very little more than 
the day wages of common labourers. Their employment, indeed, is 
more steady and uniform, and the superiority of their earnings, 
taking the whole year together, may be somewhat greater. It seems 
evidently, however, to be no greater than wliat is sufficient to com- 
pensate the superior expence of their education. 

Education in the ingenious arts and in the liberal professions, is 
still more tedious and expensive. The pecuniary rccompence, there- 
fore, of painters and sculptors, of lawyers and physicians, ought 
to be much more liberal; and it is so accordingly.' 

’ Below, p. 125 . 

“This argument seems to bo modelled closely on Cantillon. Eisai, pp. 2.?, 
24, but probably also owes something to Mandcville, Fable of the Bees, pt. 
ii., dialogue vi., vol. ii., p. 423. Cp. Lectures, pp. 173-175. 

_“The “ought” is equivalent to “it is reasonable they should be” in the 
previous paragraph, and to “must” in “must not only maintain him while he 
is idle” on p. 103. Cp. “doivent” in Cantillon, Essai, p. 24; “Ceux done <iui 
emploient des artisans ou gens dc metier, doivent necessairement payer lour 
travail plus haut que celui d'un laboureur ou manoeuvre.” The meaning need 
not be that it is ethically right that a person on whose education much has 
been spent should receive a large reward, but only that it is economically 
desirable, since otherwise there would be a deficiency of such persons. 


The profits of stock seem to be very little afferted by the easiness 
or difficulty of learning the trade in which it is emploj'ed. All the 
different ways in which stock is commonly employed in great towns* 
seem, in reality, to be almost equally easy and ecjually difficult to 
learn. One branch either of foreign or domestic trade, cannot well 
be a much more intricate business tlian another, ' 

Thirdly, The wages of labour in different occupations vary with 
the constancy or inconstancy of employment,^’ 

Employment is much more constant in some trades than in 
others. In the greater part of manufactures, a journeyman may be 
pretty sure of employment almost every day in the year that he is 
able to work. A mason or bricklayer, on the contrary, am work 
neither in hard frost nor in foul weather, and his employment at all 
other times depends upon the occasional calls of his customers. He 
is liable, in consequence, to be frequently without any. What he 
earns, therefore, while he is employed, must not only maintain him 
while he is idle, but make him some compensation for those anxious 
and desponding moments which the thought of so precarious a situ- 
ation must sometimes occasion. MTiere the computed earnings of 
the greater part of manufacturers, accordingly, are nearly upon a 
ievei with (he day wages of common labourers, those of masons and 
bricklayers are generally from one half more to double those wages. 
Where common labourers earn four and five shillings a Tveek, ma- 
sons and brickla5’ers frequently earn seven and eight; where the 
former earn six, the latter often earn nine and ten, and where the 
fromer earn nine and ten, a.s in London, the latter commonly earn 
fifteen and eighteen. No species of skilled labour, however, seems 
more eas}' to learn than that of masons and bricklayers. Chairmen 
in London, during the summer season, are said sometimes to be em- 
ployed as bricklayers. The high wages of those workmen, therefore, 
are not so much the recompence of their skill, as the compensation 
for the inconstancy of their employment. 

A house carpenter seems to exercise rather a nicer and more in- 
genious trade than a mason. In most places, however, for it is not 
universally so, his day-wages are somewhat lower. His employ- 
ment, though it depends much, does not depend so entirely upon 

“ The treatment of this head would have been clearer if it had begun with 
a distinction between “day-wages” (mentioned lower down on the page) 
and annual earnings. The first paragraph of the argument claims that an- 
nual earnings as well as day-wages will he higher in the inconstant employ- 
ment so as to counterbalance the disadvantage or repulsive force of having 
“anxious and desponding moments.” In the subsequent paragraphs, how- 
ever, this claim is lost sight of, and the discussion proceeds as if the them 
was that annual earnings are equal though day-wages may be unequal 


the occasional calk uf his customers; and it is not liable to be in- 
terrupted by the weather. 

When the trades which generally afford constant employment, 
happen in a particular place not to do so, the wages of the work- 
men always rise a good deal above their ordinary proportion to 
those of common labour. In London almost all journeymen artifi- 
cers are liable to be called upon and dismissed by their masters 
from day to day, and from week to week, in the same manner as 
day-labourers in other places. The lowest order of artificers, jour- 
neymen taylors, accordingly, earn their half a crown a day,’- 
though eighteen pence may be reckoned the wages of common la- 
bour. In small towns and country villages, the wages of journey- 
men taylors frequently scarce equal those of common labour; but 
in London they are often many weeks without employment, par- 
ticularly during the summer. 

When tlie inconstancy of employment is combined with the 
hardship, disagreeableness, and dirtiness of the work, it sometimes 
raises the w'ages of the most common labour above those of the 
most skilful artificers. A collier working by the piece is suppo.sed, at 
Newcastle, to earn commonly about double, and in many parts of 
Scotland about three times the wages of common labour. Ills high 
wages arise altogether from the hardship, disagreeableness, and 
dirtiness of his work. His emplo5anent may, upon most occasions, 
be as constant as he pleases. The coal-heavers in London exercise a 
trade which in hardship, dirtiness, and disagreeableness, almost 
equals that of colliers; and from the unavoidable irregularity in the 
arrivals of coal-ships, the employment of the greater part of them 
is necessarily very inconstant. If colliers, therefore, commonly earn 
double and triple the wages of common labour, it ought not to seem 
unreasonable that coal-heavers should sometimes earn four and 
five times those wages. In the enquiry made into their condition a 
few years ago, it was found that at the rate at which they were then 
paid, they could earn from six to ten shillings a day. Six shillings 
are about four times the wages of common labour in London, and in 
every particular trade, the lowest common earnings may always be 
considered as those of the far greater number. How e.xtravagant so- 
ever those earnings may appear, if they were more than sufficient 
to compensate all the disagreeable circumstances of the business, 
tliere would soon be so great a number of competitors as, in a trade 
which has no exclusive privilege, would quickly reduce them to a 
lower rate. 

” Below, p. 141, 142. 


The constancy or inconstancy of employmAit cannot affect 
the ordinary profits of stock in any particular trade. Whether the 
stock is or is not constantly emploc-ed depends, not upon the trade,’ 
but the trader.'^ 

Fourthly, The wages of labour vaiy according to the small or 
great trust which must be reposed in the workmen.^’’ 

The wages of goldsmiths and jewellers are ec'er3’-where superior 
to those of many other ivorkmen, not only of equal, but of much 
superior ingenuity : on account of the preciou.s materials with which 
they are intrusted. 

We trust our health to the physician ; our fortune and sometimes 
our life and reputation to the law3'er and attorney. Such confidence 
could not safelj’ be reposed in people of a very mean or low condi- 
tion. Their reward must lie such, therefore, as may give them that 
rank in the society which so important a trust requires. The long 
time and the great expcnce which must be laid out in their educa- 
tion, when combined with this circumstance, necessarily enhance 
still further the price of their labour. 

When a person emploj’s only his own stock in trade, there is no 
ttust: and the credit which he may get from other people, depends, 
not upon the nature of liis trade, but upon their opinion of his for- 
tune, probity, and prudence. The different rates of profit, therefore, 
in the different branches of trade, cannot arise from the different 
degrees of trust reposed in the traders.^® 

“Misprinted “effect" in cd. 5. 

"That “stock" consists of actual objects seems to be overlooked here. The 
constancy with which such objects can be employed is v.uiou.s: the con- 
stiuicy with which the hearse of a village is employed depends on the num- 
ber of deaths, which may be said to be "the trade,” and is cerliiinly not “the 
trader.” There is no difference of profits corresponding to differences of day- 
wages due to unequal constancy of employment, for the simple reason that 
“profits" arc calculated by their amount per annum, but the rural under- 
taker, liable to long interruption of busincs-> in healthy seasons, may just as 
well as the bricklayer be supposed to receive “some compensation for those 
anxious and desponding moments which the thought of so precarious a situ- 
ation mii«t sometimes occasion.” 

“ The argument fore-hadowed in the introductory paragraphs of the chap- 
ter requires an allegation that it is a disadv.rntage to a person to have trust 
reposed in h'ln. but no socli allegation is made. Cantillon, Essai, p. 27, says: 
“lorsqu’il faut do l.i cap.icite et de la ronfiance, on paie encore le travail plus 
chcr, comme au\ jouailliers, teneuis de complc, caissiers, et autres.” Hume, 
History, cd. of I 77 ,W vol. viii., p. J23, says: “It is a familiar rule in all busi- 
ness that every man shoidd be paid in proportion to the trust reposed in him 
and the power which he enjoys.” 

“ But some trades, e.g., that of a banker, may be necessarily confined to 
persons of more than average trustworthiness, and this may raise the rate of 
profit above the ordinary level if such persons are not sufficiently plentiful. 


Fifthly, The wa|es of labour in different employments vary ac- 
cording to the probability or improbability of success in them.*^ 

' The probability that any particular person shall ever be qualified 
for the employment to which he is educated, is very different in dif- 
ferent occupations. In the greater part of mechanic trades, success 
is almost certain ; but very uncertain in the liberal professions. Put 
your son apprentice to a shoemaker, there is little doubt of his 
learning to make a pair of shoes: But send him to study the law, it 
is at least twenty to one if ever he makes such proficiency as will en- 
able him to live by the business. In a perfectly fair lottery, those 
who draw the prizes ought to gain all that is lost by those who draw 
the blanks. In a profession where twenty fail for one that succeeds, 
that one ought to gain all that should have been gained by the un- 
successful twenty. The counsellor at law who, perhaps, at near forty 
years of age, begins to make something by his profession, ought to 
receive the retribution, not only of his own so tedious and expensive 
education, but of that of more than twenty others who are never 
likely to make any thing by it. How extravagant soever the fees of 
counsellors at law may sometimes appear, their real retribution is 
never equal to this.^'* Compute in any particular place, what is like- 
ly to be annually gained, and what is likely to be annually spent, by 
all the different workmen in any common trade, such as that of 
shoemakers or weavers, and you will find that the former sum will 
generally exceed the latter. But make the same computation with 
regard to all the counsellors and students of law, in all the different 
inns of court, and you will find that their annual gains bear but a 
very small proportion to their annual expence, even though you rate 
the former as high, and the latter as low, as can well be done. The 
lottery of the law, therefore, is very far from being a perfectly fair 
lottery; and that, as well as many other liberal and honourable pro- 
fessions, is,^® in point of pecuniary gain, evidently under-recom- 

Those professions keep their level, however, with other occupa- 
tions, and, notwithstanding these discouragements, all the most 
generous and liberal spirits are eager to crowd into them. Two dif- 
ferent causes contribute to recommend them. First, the desire of the 
reputation which attends upon superior excellence in any of them ; 

” The argument under this head, which is often misunderstood, is that pe- 
cuniary wages are (on the average, setting great gains against small ones) 
less in trades where there are high prizes and many blanks. The remote pos- 
sibility of obtaining one of the high prizes is one of the circumstances which 
“in the imaginations of men make up for a small pecuniary gain” (p. 99). 
Cannon, Essai, p. 24, is not so subtle, merely making remuneration pro- 
portionate to risk. 

Lectures, p. 175. 

” Eds. 1-4 read “arc.’ 


and; secondly, the natural confidence which everjr man has more or 
less, not only in his own abilities, but in his own good fortune. 

To excel in any profession, in which but few arrive at mediocrity,* 
is the most decisive mark of what is called genius or superior tal- 
ents. The public admiration which attends upon such distinguished 
abilities, makes always a part of their reward ; a greater or sm.aller 
in proportion as it is higher or lower in degree. It makes a consider- 
able part of that reward in the profession of physic; a still great- 
er perhaps in that of law; in pwetry and philosophy it makes almost 
the whole. 

There are some very agreeable and beautiful talents of which the 
possession commands a certain sort of admiration; but of which the 
e.xercise for the sake of gain is considered, whether from reason or 
prejudice, as a sort of public prostitution. The pecuniary recom- 
pence, therefore, of those who exercise them in this manner, must be 
sufficient, not only to pay for the time, labour, and expence of ac- 
quiring the talents, but for the discredit which attends the employ- 
ment of them as the means of subsistence. The exorbitant rewards 
of players, opera-singers, opera-dancers, &c. are founded upon those 
two principles ; the rarity and beauty of the talents, and the dis- 
credit of employing them in this manner. It seems absurd at first 
sight that we should despise their persons, and yet reward their tal- 
ents with the most profuse liberality. While we do the one, however, 
we must of necessity do the other. Should the public opinion or pre- 
judice ever alter with regard to such occupations, their pecuniary 
recompence would quickly diminish. More people would apply to 
them, and the competition would quickly reduce the price of their 
labour. Such talents, though far from being common, are by no 
means so rare as is imagined. Many people possess them in great 
perfection, who disdain to make this use of them ; and many more 
are capable of acquiring them, if any thing could be made honour- 
ably by them. 

The over-weeping conceit which the greater part of men have of 
their own abilities, is an ancient evil remarked by the philosophers 
and moralists of all ages. Their absurd presumption in their own 
good fortune, ha.s been less taken notice of. It is, however, if pos- 
sible, still more universal. There is no man living who, when in tol- 
erable health and spirits, has not some share of it. The chance pf 
gain is by everj* man more or less over-valued, and the chance of 
loss is by most men under-valued, and by scarce any man, who is in 
tolerable health and spirits, valued more than it is worth. 

“ Ed. I reads “of it.' 

loS the wealth of nations 

That the chance of gain is naturally over-valued, we may learn 
from the universal success of lotteries. The world neither ever saw, 
•nor ever will see, a perfectly fair lottery; or one in which the whole 
gain compensate^ the whole loss; because the undertaker could 
make nothing bj'.tt. In the state lotteries the tickets are really not 
worth the price vrfuch is paid by the original subscribers, and j'et 
commonly sell in the market for twenty, thirty, and sometimes forty 
per cent, advance. The vain hope of gaining some of the great prizes 
is the sole cause of this demand. The soberest people scarce look 
upon it as a folly to pay a small sum for the chance of gaining ten 
or twenty thousand pounds ; though they know that even that small 
sum is perhaps twenty or thirty per cent, more than the chance is 
worth. In a lottery in which no prize exceeded twenty pounds, 
though in other respects it approached much nearer to a perfectly 
fair one than the common state lotteries, there would not be the 
same demand for tickets. In order to have a better chance for some 
of the great prizes, some people purchrise several tickets, and oth- 
ers, small shares in a still greater number. There is not, however, a 
more certain proposition in mathematics, than that the more tickets 
you adventure upon, the more likely you are to be a loser. Adven- 
ture upon all the tickets in the lottery, and you lose for certain ; and 
the greater the number of your tickets the nearer you approach to 
this certainty. 

That the chance of loss is frequently undervalued, and scarce 
ever valued more than it is worth, we may learn from the very mod- 
erate profit of insurers. In order to make insurance, either from fire 
or sea-risk, a trade at all, the common premium must be sufficient 
to compensate the common losses, to pay the expence of manage- 
ment, and to afford such a profit as might have been drawn from an 
equal capital employed in any common trade. The person who pays 
no more than this, evidently pays no more than the real value of the 
risk, or the lowest price at which he can rea.sonalily ex[)ect to ii;sure 
it. But though many people have made a little mon^y by iiisurance, 
very few have made a great fortune; and from this consideration 
alone, it seems evident enough, that the ordinary lialance of profit 
and loss is not more advantageous in this, than in other common 
trades by which .so many people malce fortunes. Moderate, how- 
ever, as the premium of insurance commonly is, many people de- 
spise the risk too much to care to pay it. Taking the whole kingdom 
at an average, nineteen houses in twenty, or rather, perhaps, ninety- 
nine in a hundred, are not insured from fire. Sea risk is more alarm- 
ing to the greater part of people, and the proportion of ships insured 
to those not insured is much greater. Many sail, however, at all sea- 


sons, and even in time of war, without any insurance. This may 
sometimes jierhan.' lie done without any imprudence. When a meat 
company, or cv<.n a great merchant, has twenty or thirty ships at. 
sea, the}' ma}-. a" it were, insure one another. The jn cniinm .s.ii-ed 
upon them c-li, may more than compensate snehiasses as they are 
likely to meet \i iih in the cop'mon of i hau^es. 'I'he neglect of 
insurance upon shipping, however, in the same manner as upon 
houses, is, in most cases, the effect of no such nice caloiilalion, but 
of mere llioughtless rashness and presumptuous contempt of the 

The contempt of risk and the presumptuous hope of success, are 
in no period of life more active than at the age at which young peo- 
ple chust their pruie.ssioiis. How little the fear of misfortune is then 
capaiilo of bal.!iicing the iiope of good luck, appears still more evi- 
dently in the readiness of the common people to enlist as soldiers, 
or to go to sea, than in the eagerness of those of better fashion to 
enter into what are called the liberal piofessions. 

What a common soldier may lose is ob\ ions enough. Without re- 
garding the danger, however, young volunteers never enlist so read- 
ily as at the beginning of a new war; and though they have scarce 
any chance of prefeniient, they figure to themselves, in their youth- 
ful fancies, a thousand occasions of acquiring honour and distinc- 
tion which never occur. These romantic hopes make the whole price 
of their blood. Their pay is less than that of common labourers, and 
in actual service their fatigues are much greater. 

The lottery of the sea is not altogether so disadvantageous as 
that of the army. The son of a creditable lalrourer or artificer may 
frequently go to sea with his fathcr’.s consent ; but if he enli.sts as a 
soldier, ii is always without it. Other peoi)le see some chance of his 
making something by the one trade: nobody but himself sees any 
of his making an}' thing by the other. The great admiral is less the 
object of public admiration than the great general, and the highest 
success in the .sea service a less brilliant fortune and repu- 
tation than equal success in the land. The same difference runs 
through all the inferior degrees of preferment in both. By the rules 
of precedency a captain in the navy ranks with a colonel in the 
army: but he does not rank with him in the common estimation. As 
the great prizes in the lottery are less, the smaller ones must be 
more numerous. Common sailors, therefore, more frequently get 
some fortune and preferment than common soldiers; and the hope 
of those prizes is what principally recommends the trade. Though 
their skill and dexterity are much superior to that of almost any 
artificers, and though their whole life is one continual scene of 

no the wealth of nations 

hardship and danger, yet for all this dexterity and skill, for al'i 
those hardships and dangers, while they remain in the condition of 
common sailors, they- receive scarce any other recoinpence but the 
pleasure of exercising the one and of surmounting the other. Their 
wages are not greater than those of common labourers at the port 
which regulates the rate of seamen’s wages. As they are continually 
going from port to port, the monthly pay of those who sail from ali 
the different ports of Great Britain, is more nearly upon a level 
than that of any other workmen in those different places; and the 
rate of the port to and from which the greatest number sail, that is 
the port of London, regulates that of all the rest. At London the 
wages of the greater part of the different classes of workmen arc 
about double those of the same chisses at Edinburgh. But the sail 
ors who sail from the port of London seldom earn above three or 
four shillings a month more than those who sail from the port of 
Leith, and the difference is frequently not so great. In time of 
peace, and in the merchant service, the London price is from a 
guinea to about seven-and-twenty shillings the calendar month. A 
common labourer in London, at the rate of nine or ten shillings a 
week, may earn in the calendar month from forty to five-and-forty 
shillings. The sailor, indeed, over and above his pay, is supplied 
with provisions. Their value, however, may not perhaps always ex- 
ceed the difference between his pay and that of the common labour- 
er: and though it sometimes shoulci, the excess will not be char 
gain to the sailor, because he cannot share it with his wife and fam- 
ily, whom he must maintain out of his wages at home. 

The dangers and hair-breadth escapes of a life of adventures, in- 
stead of disheartening young people, seem frequently to recom- 
mend a trade to them. A tender mother, among the inferior ranks 
of people, is often afraid to send her son to school at a sea-port 
town, lest the sight of the ships and the conversation and adven- 
tures of the sailors should entice him to go to sea. The di.stant pros- 
pect of hazards, from which we can hope to extricate ourselves by 
courage and address, is not disagreeable to us, and does not raise 
the wages of labour in any emplo3mient. It is otherwise with those 
in which courage and address can be of no avail. In trades which 
are known to be very unwholesome, the wages of labour are always 
remarkably high. Unwholesomeness is a species of disagreeable- 
ness, and its effects upon the wages of labour are to be ranked un- 
der that general head. 

In all the different employments of stock, the ordinary rate of 
profit varies more or less with the certainty or uncertainty of the 


returns. These are in general less uncertain in the inland than in 
the foreign trade, and in some branches of foreign trade than in 
others ; in the trade to North America, for example, than in that tp 
Jamaica. The ordinary rate of profit always rises more or less with 
the risk. It does not. however, seem to rise in proportion to it, or so 
as to compensate it completely. Banicruptcies are frequent in 
the most hazardous trades. The most hazardous of all trades, that 
of a smuggler, though when the adventure succeeds it is likewise 
the most profitable, is the infallible road to bankruptcy. The pre- 
sumptuous hope of success seems to act here as upon all other occa- 
sions, and to entice so many adventurers into those hazardous 
trades, that their competition reduces the profit below what i.s 
sufficient to compensate the risk. To compensate it completely, the 
common returns ought, over and above the ordinary profits of 
stock, not only to malce up for all occasional losses, but to afford a 
surplus profit to the adventurers of the same nature with the profit 
of insurers. But if the common returns were sufficient for all this, 
bankruptcies would not be more frequent in these than in other 
ti ades.-- 

Of the five circumstances, therefore, which vary the wages of la4 
hour, two only affect the profits of stock; the agi'ceableness or dist 
agreeableness of the business, and the risk or security with whicl^ 
it is attended. In point of agreeableness or disagreeableness, there 
is little or no difference in the far greater part of the different em- 
ployments of stock; but a great deal in those of labour; and the or- 
dinary profit of stock, though it rises with the risk, does not always 
seem to rise in proportion to it. It should follow from all this, that, 
in the same society or neighbourhood, the average and ordinary 
rates of profit in the different employments of .slock should be more 
nearly upon a level than the pecuniary wages of the different sorts 
of labour. They are so accordingly. The difference between the 
earnings of a common labourer and those of a well employed law- 
yer or physician, is evidently much greater th;in that between the 
ordinary profitS in any two different branches of trade. The appar- 
ent difference, besides, in the profits of different trades, i.s generally 
a deception arising from our not always distinguishing what ought 
to be considered as wages, from what ought to be considered as 

“Eds. 4 and s read ‘‘their.” doubllrss a misjirint. 

“The fact is overlooked that the numerous bankruptcies may be counter- 
balanced by the instances of great gain. Below, on p. 125, the converse mis- 
take is made of comparing great successes and leaving out of account great 

““Above, p. S3. 

II2 the wealth of nations 

Apothecaries profit is become a bye-word, denoting something 
uncommonly extravagant. This great apparent profit, however, is 
frequently no more than the reasonable wages of labour. The skill 
of an apothecary is a much nicer and more delicate matter than 
that of any artificer whatever; and the trust which is reposed in 
him is of much greater importance. He is the physician of the poor 
in all cases, and of the rich when the distress or danger is not very 
great. His rervard, therefore, ought to be suitable to his skill and 
his trust, and it arises generally from the price at which he sells his 
drugs. But the whole drugs which the best employed apothecary, in 
a large market town, will sell in a year, may not perhaps cost him 
above thirty or forty pounds. Though he should sell them, there- 
fore, for three or four hundred, or at a thousand per cent, profit, 
this may frequently be no more than the reasonable wages of his 
labour charged, in the only way in which he can charge them, upon 
the price of his drugs. The greater part of the apparent profit is 
real wages disguised in the garb of profit. 

In a small sea-port town,^'* a little grocer will make forty or fifty 
per cent, upon a stock of a single hundred pounds, w’hile a consid- 
erable wholesale merchant in the same place will scarce make eight 
or ten per cent, upon a stock of ten thousand. The trade of the gro- 
cer may be necessary for the conveniency of the inhabitants, and 
the narrowness of the market may not admit the employment of a 
larger capital in the business. The man, however, must not only 
live by his trade, but live by it suitably to the qualifications which 
it requires. Besides possessing a little capital, he must be able to 
read, write, and account, and must be a tolerable judge too of, per- 
haps, fifty or sixty different sorts of goods, their prices, qualities, 
and the markets where they are to be had cheapest. He must have 
all the knowledge, in short, that is necessary for a great merchant, 
which nothing hinders him from becoming but the want of a suffi- 
cient capital. Thirty or forty pounds a year cannot be considered as 
too great a recompence for the labour of a person so accomplished. 
Deduct this from the seemingly great profits of his ckpital, and little 
more will remain, perhaps, than the ordinary profits of stock. The 
greater part of the apparent profit is, in this case too, real wages. 

The difference between the apparent profit of the retail and that 
of the wholesale trade, is much less in the capital than in small 
towns and country villages. Where ten thousand pounds can be em- 
ployed in the grocery trade, the wages of the grocer’s labour make 
but a very trifling addition to the real profits of so great a stock. 
The apparent profits of the wealthy retailer, therefore, are there 
Doubtless Kirkcaldy was in Smith’s mind 


more nearly upon a level with those of the wholesale merchant. It is 
upon this account that goods sold by retail are generally as cheap 
and frequently much cheaper in the capital than in small towns and 
country villages.-’ Grocery goods, for e.vample, are generally much 
cheaper: bread and butcher’s meat frequently as cheap. It costs no 
more to bring grocery goods to the great town than to the country 
village; but it costs a great deal more to bring corn and cattle, as 
the greater part of them must be brought from a much greater dis- 
tance. The prime cost of grocery goods, therefore, being the same 
in both places, they are cheapest where the least profit is charged 
upon them. The prime cost of bread and butcher’s meat is greater 
in the great town than in the country village; and though the profit 
is less, therefore they are not always cheaper there, but often equal- 
ly cheap. In such articles as bread and butcher's meat, the same 
cause, which diminishes apparent profit, increases prime cost. The 
extent of the market, by giving employment to greater stocks, dim- 
inishes apparent profit; but by requiring supplies from a greater 
distance, it increases prime cost. This diminution of the one and in- 
crease of the other seem, in most cases, nearly to counter-balance 
one another; which is probably the reason that, though the prices 
of corn and cattle are commonly very different in different parts of 
the kingdom, those of bread and butcher’s meat are generally very 
nearly the same through the greater part of it. 

Though the profits of stock both in the wholesale and retail trade 
are generally less in the capital than in small towns and country 
villages, yet great fortunes are frequently acquired from small be- 
ginnings in the former, and scarce ever in the latter. In small towns 
and country villages, on account of the narrowness of the market, 
trade cannot always be extended as stock extends. In such places, 
therefore, though the rate of a particular person’s profits may be 
very high, the sum or amount of them can never be very great, nor 
consequently that of his annual accumulation. In great towns, on 
the contrary, trade can be extended as slock increases, and the 
credit of a frugal and thriving man increases much faster than his 
stock. His trade is extended in proportion to the amount of both, 
and the sum or amount of his profits is in proportion to the extent 
of his trade, and his annual accumulation in proportion to the 
amount of his profits. It seldom happens, however, that great for- 
tunes are made even in great towns by any one regular, esfab- 
lished, and ■well-known branch of business, but in consequence of a 
long life of industry, frugality, and attention. Sudden fortunes, in- 
deed, are sometimes made in such places by what is called the trade 
“Above, p. 7$. 


of speculation. The*spcculative merchant exercises no one regular, 
established, or well known branch of business. He is a corn mer- 
chant this year, and a wine merchant the next, and a sugar, tobac- 
co, or tea merchant the year after. He enters into every trade when 
he foresees that it is likely to be more than commonly profitable, 
and he quits it when he foresees that its profits are likely to return 
to the level of other trades. His profits and losses, therefore, can 
bear no regular proportion to those of any one established and well- 
known branch of business. A bold adventurer may sometimes ac- 
quire a considerable fortune by two or three successful specula- 
tions; but is just as likely to lose one by two or three unsuccessful 
ones. This trade can be carried on no where but in great towns. It is 
only in places of the most extensive commerce and correspondence 
that the intelligence requisite for it can be had. I* 

The five circumstances above mentioned, though they occasion 
considerable inequalities in the wages of labour and profits of stock, 
occasion none in the whole of the advantages and disadvantages, 
real or imaginary, of the different employments of either. The na- 
ture of those circumstances is such, that they make up for a small 
pecuniary gain in some, and counter-balance a great one in others. 

In order, however, that this equality may take place in the whole 
of their advantages or disadvantages, three things are requisite 
even where there is the most perfect freedom. First, the employ- 
ments must be well known and long establislied in the neighbour- 
hood; secondly, they must be in their ordinary, or what may be 
called their natural state; and, thirdly, they must be the sole or 
principal employments of those who occupy them. 

First, this equality can take place only in those employments 
which are well known, and have been long established in the neigh- 

Where all other circumstances are equal, wages are generally 
higher in new than in old trades. When a projector attempts to es- 
tablish a new manufacture, he must at first entice his workmen 
from other employments by higher wages than they can either earn 
in their own trades, or than the nature of his wmrk would otherwise 
require, and a considerable time must pass away before he can ven- 
ture to reduce them to the common level. Manufactures for which 
the demand arises altogether from fashion and fancy, are continu- 
ally changing, and seldom last long enough to be considered as old 
established manufactures. Those, on the contrary, for which the de- 
mand arises chiefly from use or necessity, are less liable to change, 
and the same form or fabric may continue in demand for whole 
centuries together. The wages of labour, therefore, are likely to be 


higher in manufactures of the former, than in fhose of the latter 
kind. Birmingham deals chiefly in manufactures of the former 
kind; Sheffield in those of the latter; and the wages of labour in. 
those two different places, are said to be suitable to this difference 
in the nature of their manufactures. 

The establishment of any new manufacture, of any new branch 
of commerce, or of any new practice in agriculture, is always a 
speculaiion, from which the projector promises himself extraordi- 
nary profits. These profits sometimes are very great, and some- 
times, more frequently, perhaps, they are quite otherwise; but in 
general they bear no regular proportion to those of other old trades 
in the neighbourhood. If the project succeeds, they are commonly 
at first very high. When the trade or practice becomes thoroughly 
established and well known, the competition reduces them to the 
level of other trades. 

Secondly, This equality in the whole of the advantages and dis- 
advantages of the different employments of labour and stock, can 
take place only in the ordinary, or what may be called the natural 
state of those employments. 

The demand for almost every different species of labour is some- 
times greater and sometimes less than usual. In the one case the ad- 
vantages of the employment rise above, in the other they fall below 
the common level. The demand for country labour is greater at hay- 
time and harvest, than during the greater part of the year; and 
wages rise with the demand. In time pf war, when forty or fifty 
thousand sailors are forced from the merchant service into that of 
the king, the demand for sailors to merchant ships necessarily rises 
with their scarcity, and their wages upon such occasions commonly 
rise from a guinea and seven-and-twenty shillings, to forty shillings 
and three pounds a month. In a decaying manufacture, on the con- 
trary, many workmen, rather than quit their old trade, arc content- 
ed with smaller wages than would othenvise be suitable to the na- 
ture of their employment. 

The profits of stock vary with the price of the commodities in 
which it is employed. As the price of any commodity rises above 
the ordinary or average rate, the profits of at least some part of 
the stock that is employed in bringing it to market, rise above their 
proper level, and as it falls they sink below it. All commodities ^ 
more or less liable to variations of price, but some are much more 
so than others. In all commodities whidi are produced by human 
industry, the quantity of industry annually employed is necessarily 
regulated by the annual demand, in such a manner that the average 
annual produce may, as nearly as possible, be equal to the average 


annual consumptidn. In some employments, it has already been ob- 
served,-® the same quantity of industry will always produce the 
•same, or very nearly the same quantity of commodities. In the linen 
or woollen manufactures, for example, the same number of hands 
will annually work up very nearly the same quantity of linen and 
woollen cloth. The variations in the market price of such commod- 
ities, therefore, can arise only from some accidental variation in 
the demand. A public mourning raises the price of black cloth.®^ 
But as the demand for most sorts of plain linen and woollen cloth 
is pretty uniform, so is likewise the price. But there are other em- 
plo3mients in which the same quantity of industry will not always 
produce the same quantity of commodities. The same quantity of 
industry, for example, will, in different years, produce very different 
quantities of corn, wine, hops, sugar, tobacco, &c. The price of such 
commodities, therefore, varies not only with the variations of de- 
mand, but with the much greater and more frequent variations of 
quantity, and is consequently extremely fluctuating. But the profit 
of some of the dealers must necessarily fluctuate with the price of 
the commodities. The operations of the speculative merchant are 
principally employed about such commodities. He endeavours to 
buy them up when he foresees that their price is likely to rise, and 
to sell them when it is likely to fall. 

Thirdly, This equality in the whole of the advantages and disad- 
vantages of the different employments of labour and stock, can 
take place only in such as are the sole or principal employments of 
those who occupy them. 

Wnen a person derives his subsistence from one employment, 
which does not occupy the greater part of his time; in the intervaK 
of his leisure he is often willing to work at another for less wagc« 
than would otherwise suit the nature of the employment. 

There still subsists in many parts of Scotland a set of people 
called Cotters or Cottagers, though they were more freciuent some 
years ago than they are now. They arc a sort of out-servants of the 
landlords and farmers. The usual reward which they receive from 
their masters is a house, a small garden for pot herbs, as much grass 
as will feed a cow, and, perhaps, an acre or two of bad arable land. 
When their master has occasion for their labour, he gives them, be- 
sides, two pecks of oatmeal a week, worth about sixteen pence ster- 
ling. During a great part of the year he has little or no occasion for 
their labour, and the cultivation of their own little possession is not 
sufficient to occupy the time which is left at their own disposal. 
When such occupiers were more numerous than they are at pres- 

“ Above, p. 58. " The illustration has already been used above, p. sg. 


ent, they are said to have been willing to give their spare time for 
a very small recompence to any body, and to have wrought for less 
wages than other labourers. In ancient times they seem to have 
been common all over Europe. In countries ill cultivated and worse 
inhabited, the gi-eater part of the landlords and farmers could not 
otherwise provide themselves with the e.xtraordinary number of 
hands, which country labour requires at certain seasons. The daily 
or weekly recompence which .such labourers occasionally received 
from their masters, was evidently not the whole price of their la- 
bour. Their small tenement made a comsiderable part of it. This 
daily or weekly recompence, however, seems to have been consid- 
ered as the whole of it, by many writers who have collected the 
prices of labour and provisions in ancient times, and who Tiave 
taken pleasure in representing both as wonderfully low. 

The produce of such labour comes frequently cheaper to market 
than would otherwise be suitable to its nature. Stockings in many 
parts of Scotland are knit much cheaper than they can any-where 
be wrought upon the loom. They are the work of servants and la- 
bourers, who derive the principal part of their .subsii-tet'cc from 
some other employment, iltn-e than a thousand pair of Shetland 
stockings are annually imported into Leith, of which tlic price is 
from five pence to seven pence a pair. At Learwick, the small capi- 
tal of the Shetland islands, ten pence a day, 1 have been assured, is 
a common pi ice of common labour. In the same i.sland.s they knit 
worsted stockings to the value of a guinea a pair and upwards. 

The spinning of linen yarn is carried on in Scotland nearly in the 
same way as the knitting of stockings, by servants who are chiefly 
hired for other purposes. They earn but a very scanty .subsistence, 
who endeavour to get their whole livelihood by cither of those 
trades. In most parts of Scotland she is a good spinner who can earn 
twenty pence a week. 

In 0 {)ulpnt countries the market is generally so e.Ktensive that any 
one trade is sufficient to employ the whole labour and stock of those 
v/ho occupy it. fnstances of people's living by one employment, and 
at the same time deriving some little advantage from another, oc- 
cur chiefly in poor countries. The following instance, however, of 
something of the same kind is to be found in the capital of a very 
rich one. There is no city in Europe, I believe, in which house-rept 
is dearer than in London, and yet I know no capital in which a fur- 
nished apartment can be hired so cheap. Lodging is not only much 
cheaper in London than in Paris; it is much cheaper than in Edin- 
burgh of the same degree of goodness; and what may seem extraor- 
dinary, the dearness of house-rent is the cause of the cheapness of 


lodging. The dearne&s of house-rent in London arises, not only from 
those causes which render it dear in all great capitals, the dearness 
of labour, the dearness of all the materials of building, which must 
generally be brought from a great distance, and above all the dear- 
ness of ground-rent, every landlord acting the part of a monopo- 
list, and frequently exacting a higher rent for a single acre of bad 
land in a town, that can be had for a hundred of the best in the 
country: but it arises in part from the peculiar manners and cus- 
toms of the people which oblige every master of a family to hire a 
whole house from top to bottom. dwelling-house in England 
means every thing that is contained under the same roof. In 
France, Scotland, and many other parts of Europe, it frequently 
means no more than a single story. A tradesman in London is ob- 
liged to hire a whole house in that part of the town where his cus- 
tomers live. His shop is upon the ground-floor, and he and his fam- 
ily sleep in the garret; and he endeavours to pay a part of his 
house-rent by letting the two middle stories to lodgers. He expects 
to maintain his family by his trade, and not by his lodgers. Where- 
as, at Paris and Edinburgh, the people who let lodgings have com- 
monly no other means of sub.«istence: and the price of the lodging 
must pay, not only the rent of the house, but the whole expence of 
the family. 

Part II 

Inequalities occasioned by the Policy of Europe 

Such are the inequalities in the whole of the advantages and dis- 
advantages of the different employments of labour and stock, 
which the defect of any of the three requisites above-mentioned 
must occasion, even where there is the most perfect liberty. But the 
policy of Europe, by not lear’ing things at perfect liberty, occasions 
other inequalities of much greater importance. 

It does this chiefly in the three following ways., by restrain- 
ing the comrjetition in some employments to a smaller number than 
would otherwise be disposed to enter into them ; secondly, by in- 
creasing it in others beyond what it naturally would be; and, third- 
ly, by obstructing the free circulation of labour and stock, both 
from employment to employment and from place to place. 

First, The policy of Europe occasions a very important inequal- 
ity in the whole of the advantages and disadvantages of the differ- 
ent emplo3rments of labour and stock, by restraining the competi- 


tion in some eiiiployments to a smaller number than might other- 
wise be disposed to enter into them. 

The exclusive privileges of corporations are the principal mean’s 
it makes use of for this purpose. 

The exclusive privilege of arfincorporated trade necessarily re- 
strains the competition, in the town where it is established, to those 
who are free of the trade. To have served an apprenticeship in the 
town, under a master properly qualified, is commonly the necessary 
requisite for obtaining this freedom. The bye-laws of the corpora- 
tion regulate sometimes the number of apprentices which any mas- 
ter is allowed to have, and almost always the number of years 
which each apprentice is obliged to serve. The intention of both 
regulations is to restrain the competition to a much smaller number 
than might otherwise be disposed to enter into the trade. The limi- 
tation of the number of apprentices restrains it directly. A long 
term of apprenticeship restrains it more indirectly, but as effectu- 
ally, by increasing the expence of education. 

In Sheffield no master cutler can have more than one apprentice 
at a time, by a bye-law of the corporation. In Norfolk and Norwich 
no master weaver can have more than two apprentices, under pain 
of forfeiting five pounds a month to the king.-** No master hatter 
can have more than two apprentices any-where in England, or in 
the English plantations, under pain of forfeiting five pounds a 
month, half to the king, and half to him who shall sue in any court 
of record.*^” Both these regulations, though they have been con- 
firmed by a public law of the Idngdom, are evidently dictated by 
the same corporation spirit which enacted the bye-law of Shef- 
field.**® The silk weavers in London had scarce been incorporated a 
year when they enacted a bye-law, restraining any master from hav- 
ing more than two apprentices at a time. It required a particular act 
of parliament to rescind this bye-law.®^ 

“ Under is and 14 Car. II„ c. 5, § iS. 

“8 Eliz., c. II, § 8; I Jar. I., c. 17, § 3; s Geo. II., c. 22. 

®But 8 Eliz., t. II, was enacted “at the lamentable suit and complaint” 
not of the hatters but of the caivmakers, who alleged that they were being 
impoverished by the exces.'ivc use of hats, which w ere made of foreign wool, 
and the e.xtension to the colonies of the restriction on apprentices by S 
Geo. II., c. 22, was doubtless suggested by the English liattcr.s’ jealousy of 
the American hatters, so that this regulation was not dictated by quite the 
same spirit as the Sheffield by-law. • 

” The preamble of 13 and 14 Car. II., c. 15, says that the company of silk 
throwers in London were incorporated in 1629, and the preamble of 20 
Car. II., c. 6, says that the trade had lately been obstructed because the com- 
pany had endeavoured to put into execution a certain by-law made by them 
nearly forty years since, restricting the freemen to 160 spindles and the as- 
sistants to 240. The act 20 Car. II., c. 6, accordingly declares this by-law 
void. It also enacts that “no hy-Iaw alre^y made or hereafter to be made 

'20 ihe wealth of nations 

Seven years seeni anciently to have been, all over Europe, the 
usual term established for the duration of apprenticeships in the 
greater part of incorporated trades. All such incorporations were 
anciently called universities; which indeed is the proper Latin name 
for any incorporation whatever. The university of smiths, the uni- 
versity of taylors, &c. are expressions which we commonly meet 
With in the old charters of ancient towns.’’’" When those particular 
incorporations which are now peculiarly called universities were 
first established, the term of years which it was necessary to study, 
in order to obtain the degree of master of arts, appears evidently to 
have been copied from the term of apprenticeship in common 
trades, of which the incorporations were much more ancient. As to 
have wrought seven years under a master properly qualified, was 
necessary, in order to entitle any person to become a master, and to 
have himself apprentices in a common trade; so to have studied 
seven years under a master properly qualified, was necessary to en- 
title him to become a master, teacher, or doctor (words anciently 
synonimous) in the liberal arts, and to have scholars or apprentices 
(words likewise originally synonimous) to study under him. 

By the jth of Elizabeth, commonly called the Statute of .\p- 
prenticeship,’’’’’’ it w'as enacted, that no person should for the future 
exercise any trade, craft, or mystery at that time exercised in Eng- 
land, unless he had previously served to it an apprenticeship of 
seven years at least; and what before had been the bye-law of many 
particular corporations, became in England Ihe general and public 
law of all trades carried on in market towns. For though the words 
of the statute are very general, and seem plainly to include the 
whole kingdom, by interpretation its operation has been limited to 
market towns, it having been held that in country villages a person 
may exercise several different trades, though he has not served a 
seven years apprenticeship to each, they being necessary for the 
conveniency of the inhabitants, and the number of people frequently 
not being sufficient to supply each with a particular .set of hands.®^ 

By a strict interpretation of the words too the operation of this 

by the said company shall limit the number of apprentices to less than 

”“In Italy a mestiere or company of artisans and tradesmen was some- 
times styled an arj or universilas. . . . The company of mercers of Rome 
arc* styled univrnilas merciariorum, and the company of bakers there uni- 
verntas pislorum.” — ^Madoa, Firma Burgi, 1726, p. 32. 

” C. 4, § 31. 

‘ “It hath been held that this statute doth not restrain a man from using 
several trades, so as he had been an apprentice to all ; wherefore it indemni- 
fies all petty chapmen in little towns and villages because their masters kept 
the same mixed trades before.” — ^Matthew Bacon, New Abridgement of the 
Law, 3rd ed., 1768, vol. iii., p. SS3> J-v. Master and servant. 

statute has been limited to those trades which' were established in 
England before the sth of Elizabeth, and has never been extended 
to such as have been introduced since that time?'’ This limitatioh 
has gi^-en occasion to several distinctions which, considered as rules 
of police, appear as foolish as edn well be imagined. It has been ad- 
judged, for example, that a coach-maker can neither himself make 
nor employ journeymen to make his coach-wheels; but must buy 
them of a master whecl-wright; this latter trade having been exer- 
cised in England before the 5th of Elizabeth. But a wheel-wright, 
though he has never served an apprenticeship to a coach-maker, 
may either himself make nr employ journeymen to make coaches: 
the trade of a coach-maker not being within the statute, because 
not exercised in England at the time when it was made.-'*" The 
manufactures of ilanchester, Birmingham, and Wolverhampton, 
are many of them, upon this account, not within the statute; not 
having been exercised in England before the 5th of Elizabeth. 

In France, the duration of apprenticeships is different in different 
to^^ms and in different trades. In Paris, five years is the term re- 
quired in a great number ; but before any person can be qualified to 
exercise the trade as a master, he must, in many of them, serve five 
years more as a journeyman. During this latter term he is called the 
companion of his ma.ster, and the term itself is called his com- 

In Scotland there is no general law which regulates universally 
the duration of apprenticc.ships. The term is different in different 
corporations. Where it is long, a part of it may generally be re- 
deemed by paying a small fine. In most towns too a very sm.oll fine 
is sufficient to purchase the freedom of any corporation. The weav- 
ers of linen and hempen cloth, the principal manufactures of the 
country, as well as all other artificers subservient to them, wheel- 
makers, reel-makers, &c. may exercise their trades in any town cor- 
porate without paying any fine. In all towns corporate all persons 
are free to selj butcher’s meat upon any lawful day of the week. 
Three years is in Scotland a common term of apprenticeship, even 
in some very nice trades: and in general I know of no country in 
Enrqie in which corporation laws are so little oppressive. 

The property which every man has in his own labour, as it is the 
original foundation of all other property,^" so it is the most sacred 

Ibid., vol. iii., p 552. Ibid., vol. i , p 553. 

■"'Bacon (ibid., lii., S. 5 . 3 ), however, says distinctly “A coachmaker is 
within this statute," on the authority of Ventris’ Reporls, p. 346 

'' Compagnon. ■“ CompaRnonnape. 

Contrast with this the account of the origin of property in the Lectures, 
pp. 107-127. 

122 the wealth of nations 

and inviolable. The 'patrimony of a poor man lies in the strength 
and dexterity of his hands; and to hinder him from employing this 
strength and dexterity in what manner he thinks proper without in- 
jury toiiis neighbour, is a plain violation of this most sacred prop- 
erty. Jt is a manifest encroachmifct upon the just liberty both of 
the workman, and of those who might be disposed to employ him. 
As it hinders the one from working at what he thinks proper, so it 
hinders the others from employing whom they think proper. To 
judge whether he is fit to be employed, may surely be trusted to 
the discretion of the employers whose interest it so much concerns. 
The affected anxiety of the law-giver lest they should employ an 
improper person, is evidently as impertinent as it is oppressive. 

The institution of long apprenticeships can give no security that 
insufficient workmanship shall not frequently be exposed to public 
sale. WTien this is done it is generally the effect of fraud, and not of 
inability; and the longest apprenticeship can give no security 
against fraud. Quite different regulations are necessary to prevent 
this abuse. The sterling mark upon plate, and the stamps upon 
linen ** and woollen cloth,^^ give the purchaser much greater secur- 
ity than any statute of apprenticeship. He generally looks at these, 
but never thinks it worth while to enquire whether the workmen bad 
served a seven years apprenticeship. 

The institution of long apprenticeships has no tendency to form 
young people to industry. A journeyman who works by the piece is 
likely to be industrious, because he derives a benefit from every 
exertion of his industry. An apprentice is likely to be idle, and al- 
most always is so, because he has no immediate interest to be other- 
wise. In the inferior employments, the sweets of labour consist al- 
together in the recompence of labour. They who are soonest in a 
condition to enjoy the sweets of it, are likely soonest to conceive a 
relish for it, and to acquire the early habit of industry. \ young 
man naturally conceives an aversion to labour, when for a long 
time he receives no benefit from it. The boys who are put out ap- 
prentices from public charities are generally bound for more than 
the usual number of years, and they generally turn out very idle 
and worthless. 

Apprenticeships were altogether unknown to the ancients. The 
reciprocal duties of master and apprentice make a considerable ar- 
ticle in every modern code.^- The Roman law is perfectly silent with 

"Of Scotch manufacture, lo Ann., c. 21; 13 Geo. I., c. 26. 

“ 39 Eliz., c. 20; 43 Eliz., c. 10, § 7. 

" article on apprentices occupies twenty-four pages in Richard Burn’s 
Justice 0} the Peace, 1764. 


regard to them. I know no Greek or Latin work' (I might venture, I 
believe, to assert that there is none) which expresses the idea we now 
annex to the word Apprentice, a servant bound to work at a pari 
ticular trade for the benefit of a master, during a term of years, up- 
on condition that the master sldft teach him that trade. 

Long apprenticeships are altogether unnecessary. The arts, which 
are much superior to common trades, such as those of making clocks 
and watches, contain no such mystery as to require a long course of 
instruction. The first invention of such beautiful machines, indeed, 
and even that of some of the instruments emjfioyed in making them, 
must, no doubt, have been the work of deep thought and long time, 
and may justly be considered as among the happiest efforts of hu- 
man ingenuity. But when both have been fairly invented and are 
well understood, to explain to any young man, in the completest 
manner, how to apply the instruments and how to construct the ma- 
chines, cannot well retjuire more than the lessons of a few weeks; 
perhaps those of a few days might be sufficient. In the common me- 
chanic trades, those of a few days might certainly be sufficient. The 
dexterity of hand, indeed, even in common trades, cannot be ac- 
quired without much practice and experience. But a young man 
would practise with much more diligence and attention, if from the 
beginning he wrought as a journeyman, being paid in proportion to 
the little work which he could execute, and paying in his turn for 
the materials which he might sometimes spoil through awkwardness 
and inexperience. Ilis education would generally in this way be more 
effectual, and always less tedious and expensive. The master, indeed, 
would be a loser. He would lose all the wages of the apprentice, 
which he now saves, for seven years together. In the end, perhaps, 
the apprentice himself would be a loser. In a trade so easily learnt 
he would have more competitors, and his wages, when he came to be 
a complete workman, would be much less than at present. T'he same 
increase ol competition would reduce the profits of che masters as 
well as the wages of the workmen. The trades, the crafts, the mys- 
teries,'*'’ would all be lo.sers. But the public would be a gainer, the 
work of all artificers coming in this way much cheaper to market. 

It is to prevent this reduction of price, and consequently of wages 
and profit, by restraining that free competition which would most 
certainly occa.sion it, that all corporations, and the greater part.of 
corporation laws, have been established. In order to erect a cor- 

‘’The last two terms seem to be used rather contemptuously. Probably 
Smith had fresh in his recollection the passage in which Madox ridicules as a 
“piece of puerility” the use of the English word “mLsteric,” derived from 
“the Gallick word mestera, mistera and misteria,” as if it “signified some- 
thing tivornpioides, mysterious.” — Firma Burgi, 1726, pp. 33-35. 


poration, no other authority in ancient times was requisite in many 
parts of Europe, but that of the town corporate in which it was es- 
tablished. In England, indeed, a charter from the king was likewise 
necessary. But this pre’^ogative of the crown seems to have been re- 
served rather for extorting money from the subject, than for the de- 
fence of the common liberty against such oppressive monopolies. 
Upon paying a fine to the king, the charter seems generally to have 
been readily granted; and when any particular chiss of artificers or 
traders thought proper to act as a corporation without a charter, 
such adulterine guilds, as they were called, were not always dis- 
franchised upon that account, but obliged to fine annually to the 
king for perniLssion to exercise their usurped privileges.^* The im- 
mediate inspection of all corporations, and of the byc-laws which 
they might think proper to enact for their own government, be- 
longed to the town corporate in which they were established; and 
whatever discipline was exercised over them, proceeded commonly, 
not from the king, but from that greater incorporation of w'hirh 
those subordinate ones were only parts or members.”' 

The government of towns corporate was altogether in the hands 
of traders and artificers; and it was the manifest interest of every 
particular class of them, to prevent the market from being over- 
stocked, as they commonly express it, with their own particular 
species of industry; which is in reality to keep it always under- 
stocked. Each class was eager to establish regulations proper for this 
purpose, and, provided it was allowed to do so. was willing to con- 
sent that every other clas-s should do the same. I consequence of 
such regulations, indeed, each dress w'as obliged to buy the goods 
they had occa.'ion for from every other within the town, somewhat 
dearer than they nthirwi-e might have clone. But in recnmi)enie, 
they were enaltlcd to =dl their own just as muih clcarei ; so that so 
far it was as broad as long, .as they say; and in the dealing- of the 
different classes within the town with one anoihcr, none of them 
were losers by these ngulations. Cut in their dealings with the 
country they were all meat gainers; and in thesi' latter dealings con- 
sists the whole trade which .-uppcjrts and enriches every town. 

Every town draws its whole subsistence, and all the materials of 
its industry, from the countr}'. It pays for these chiefly in two ways: 
fir?!, by sending back to the country a part of those materials 
wToiight up and manufactured; in which case their price is aug- 

" ?((• M,ido\ Firma Burgi, p. 26, &c. Tliis note appears first in cd. 2. 

■" “Peradventure from these secular gilds or in imitation of them sprang 
the method or practice of gildating and embodying whole towns.” — Madox, 
Firma Burgi, p. 27. 


menLed by the wages of the workmen, and ihe iVofits of their mas- 
ters or immediate eniploj ers: secondly, by setuiing to it a part l>ath 
of the nide and m.imif.ictnnd produce, eiihei of other countries, or 
of distant part'' of the same coinitiy. inported intk' the town; in 
which case toi' the original price of those e.'ods is .moment ed by the 
wages of the carriets or sailots. and by the profits of the merchants 
who employ them. In what is gained upon the fiist of those two 
branches of commerce, consists the advantage which the town 
makes by its manufaetures; in what is gained upon the second, the 
advantatte of its inland and feteign trade. The w.iges of the work- 
men, and the profits of their ilifleri nl employers, m.ike up the whole 
of what is gained upon both. Whalevei regulations, thereiiire, tend 
to those wttge- and ptofits l>e\'ond what they otherwise 
would be, tend to inable the town to, with a smaller 
quantity of its labour, the produce of a greater i[uajitity of the la- 
bour of the country. They give the traders and artificers in the town 
an advantage over the landlords, farmers, ami labourers in the 
country, and break down that natural equtility which would other- 
wise take place in the commerce which is carried on between them. 
The whole annual produce of the labour of the society is tinmially 
divided between those two different sets of people. By means of 
those regulations a greater share of it Is given to the inhabitant.s of 
the town than would otherwise fall to them; and a less to those of 
the country. 

The price which the town really pays for the provisions and ma- 
terials annually imported into it, is the quantity of manufacture.s 
and other goods annually exported from it. The dearer the latter are 
sold, the cheaper the former are bought. The industry of the town 
becomes more, and that of the country les.s advantageous. 

That the industry which is carried on in towns is, cvery-whorc in 
Europe, more advantageous than that which is carried on in the 
country, without entering into any very nice computations, we may 
satisfy our.sclvcs by one very simple and obvious observation. In 
every country of Europe w'e find, at least, a hundred people who 
have acquired great fortunes from small beginnings by trade and 
manufactures, the industry which properly belongs to towns, for 
one who has done so by that which properly belongs to the country, 
the raising of rude produce by the improvement and cultivation of 
land. Industry, therefore, must be better rewarded, the wages of 
labour and the profits of stock must evidently be greater in the one 
situation than in the other.’**’' But stock and labour naturally seek 

"The argument is unsound in the absence of any proof that the more 
numerous successes arc not counterbalanced by equally numerous failures; 
cp. above p. in, note. 

126 the wealth of nations 

the most advantageous employment. They naturally, therefore, re- 
sort as much as they can to the town, and desert the country. 

• The inhabitants of a to\vn, being collected into one place, can 
easily combine together. The most insignificant trades carried on in 
towns have accordingly, in someplace or other, been incorporated; 
and even where they have never been incorporated, yet the cor- 
poration spirit, the jealousy of strangers, the aversion to take ap- 
prentices, or to communicate the secret of their trade, generally 
prevail in them, and often teach them, by voluntary associations 
and agreements, to prevent that free competition which they cannot 
prohibit by bye-laws. The trades which employ but a small number 
of hands, run most easily into such combinations. Half a dozen 
wool-combers, perhaps, are necessary to keep a thousand spinners 
and weavers at work. By combining not to take apprentices they 
can not only engross the employment, but reduce the whole manu- 
facture into a sort of slavery to themselves, and raise the price of 
their labour above what is due to the nature of their work. 

The inhabitants of the country, dispersed in distant places, can- 
not easily combine together.'*'^ They have not only never been in- 
corporated, but the corporation spirit never has prevailed among 
them. No apprentice.ship has ever been thought necessary to qualify 
for husbandry, the great trade of the country. After what are called 
the fine arts, and the liberal professions, however, there is perhaps 
no trade which requires so great a variety of knowledge and experi- 
ence. The innumerable volumes which have been written upon it in 
all languages, may satisfy us, that among the wisest and most 
learned nations, it has never been regarded as a matter very easily 
understood. And from all those volumes we .shall in vain attempt to 
collect that knowledge of its various and complicated operations, 
which is commonly possessed even by the common farmer; how con- 
temptuously soever the very contemptible authnr.s of some of them 
may sometimes affect to speak of him. There i.s scarce any cnirmon 
mechanic trade, on the contrary, of which all the operations may 
not be as completely and distinctly explained in a pamirhlet of a 
very few pages, as it is possible for words illustrated by figurc‘= to 
explain them. In the history of the arts, now publishing by the 
French academy of sciences,^* several of them are actually ex- 
plained in this manner. The direction of operations, besides, which 
must be varied with every change of the weather, as well as with 
many other accidents, requires much more judgment and discretion, 

"Below.pp. 619, 620. 

“'Descriptions des Arts et Mitiers faites ou approuvies par Messieurs de 
V Academic Royale des Sciences, 1761-B8. 


than that of those which are always the saint or verj' nearlj' the 

Not only the art of the fanner, the general direction of the opera- 
tions of husbandry, but many inferior branches of country labour, 
require much more skill and experience than the ereater part of me- 
chanic trades. The man who works upon brass and iron, works with 
instruments and upon materials of which the temper is alwaj's the 
same, or ver}' nearly the same. But the man who ploughs the ground 
with a team of horses or oxen, works with instruments of which the 
health, strength, and temper, are verj- different upon different oc- 
casions. The condition of the m.atorials which he works upon too is 
as variable ;is that of the instruments which he works with, and both 
require to be managed with much judgment and discretion. The 
common ploughman, though generall3' regarded as the pattern of 
stupidity and ignorance, is seldom defective in this judgment and 
discretion. He is less accustomed, indeed, to social intercourse than 
the mechanic who lives in a town. His voice and language arc more 
uncouth and more difficult to be understood by those who arc not 
used to them. His understanding, however, being accustomed to 
consider a greater variety of objects, is generally much superior to 
that of the other, whose whole attention from morning till night 
is commonly occupied in performing one or two very simple opem- 
tions. How much the lower ranks of people in the country arc really 
superior to those of the town, is well known to every man whom 
either business or curiosity has led to converse much with both.*'* 
In China and Indostan accordingly botli the rank and the wages of 
country labourers are said to be .superior to those of the greater part 
of artificers and manufacturers. They would probably be so every- 
where, if corporation laws and the coriioration siiirit did not pre- 
vent it. 

The superiority which the industry of the towns has every-where 
in Europe over that of ihe country, is not altogether owing to cor- 
porations and coiporation laws. It is supported by many other regu- 
lations. The hfgh duties upon foreign manufactures and upon all 
goods imported by alien merchants, all tend to the same purpose. 
Corporation laws enable the inhabitants of towns to raise their 
prices, without fearing to be under-sold by the free competition of 
their own countrymen. other regulations secure them equally 
against that of foreigners. The enhancement of price occasioneef by 
both is cvery-whcrc finally paid by the landlords, farmers, and la- 
bourers of the country, who have seldom opposed the establishment 
of such monopolies. They have commonly neither inclination nor 
" Lectures, p. 253. 


fitness to enter into'combinations; and the clamour and sophistry 
of merchants and manufacturers easily persuade them that the 
private interest of a part, and of a subordinate part of the society, is 
the general interest of the vrhole. 

In Great Britain the superiority of the industry of the towns over 
that of the country, seems to ha%'e been greater formerly than in 
the present times. The wages of country labour approach nearer to 
those of manufacturing labour, and the profits of stock employed in 
agriculture to those of trading and manufacturing stock, than they 
are said to ha\-e done in the last century, or in the beginning of the 
present. This change may be regarded as the necessary, though very 
late consequence of the extraordinary encouragement given to the 
industry of the towns. The stock accumulated in them comes in time 
to be so great, that it can no longer be employed with the ancient 
profit in that species of industry which is peculiar to them. That in- 
dustry has its limits like every other: and the increase of stock, by 
increasing the competition, necessarily reduces the profit. The 
lowering of profit in the town forces out stock to the country, where, 
by creating a new demand for country labour, it necessarily raises 
its wages. It then spreads itself, if I may say so, over the face of the 
land, and by being employed in agriculture is in part restored to the 
country, at the expcnce of which, in a great measure, it had orig- 
inally been accumulated in the town. That every-where in Europe 
the greatest improvements of the country have been owing to such 
overflowings of the stock originally accumulated in the towns, I 
shall endeavour to show hereafter; and at the same time to dem- 
onstrate, that though some countries have by this course attained 
to a considerable degree of opulence, it is in itself necessarily slow, 
uncertain, liable to be disturbed and interrupted by innumerable 
accidents, and in every respect contrary^ to the order of nature and 
of reason. The interests, prejudices, laws and cu.stnms which have 
given occasion to it, I shall endeavour to explain as fully and rlis- 
tinctly as I can in the third and fourth books of this inquiry. 

People of the same trade seldom meet together, e\'en for merri- 
ment and diversion, but the conversation ends in a conspiracy 
against the public, or in some contrivance to raise prices. It is im- 
possible indeed to prevent such meetings, by any law which either 
could be executed, or would be consistent with liberty and justice. 
But though the law cannot hinder people of the same trade from 
sometimes assembling together, it ought to do nothing to facilitate 
such assemblies; much less to render them necessary. 

A regulation which obliges all those of the same trade in a par- 

" Below, pp. 384-396. 

ticular town to enter their names and places of abode in a public 
register, facilitates such assemblies. It connects Individuals who 
might never otherwise be known to one another, and gives every 
man of the trade a direction where to find every other man of it. 

A regulation which enables those of the same trade to tax them- 
selves in order to provide for their poor, their sick, their widows and 
orphans, by giving them a common interest to manage, renders such 
assemblies necessary. 

An incorporation not only renders them necessary, but makes the 
act of the majority binding upon the whole. In a free trade an ef- 
fectual combination cannot be established but by the unanimous 
consent of every single trader, and it cannot last longer than every 
single trader continues of the same mind. The majority of a cor- 
poration can enact a bye-law with proper penalties, which will limit 
the competition more effectually and more durably than any volun- 
tary combination whatever. 

The pretence that corporations are necessary for the better gov- 
ernment of the trade, is without any foundation. The real and ef- 
fectual discipline which is exercised over a workman, is not that of 
his corporation, but that of his customers. It is the fear of losing 
their employment which restrains his frauds and corrects his negli- 
gence. An exclu-sive corporation necessarily weakens the force of this 
discipline. A particular set of workmen must then be employed, let 
them behave well or ill. It is upon this account, that in many large 
incorporated towns no tolerable workmen are to be found, even in 
some of the most necessary trades. If you would have your work 
tolerably e.xecuted, it must be done in the suburbs, where the work- 
men, having no exclusive privilege, have nothing but their char- 
acter to depend upon, and you must then smuggle it into the town 
as well as you can. 

It is in this manner that the policy of Europe, by restraining the 
competition in some employments to a smaller number than would 
otherwise be disposed to enter into them, occasions a very important 
inequality in tTie tihole of the advantages and disadvantages of the 
different employments of labour and .slock. 

Secondly. The polic}' of Europe, by increasing the competition 
in some employments beyond what it naturally would be, occasions 
another inequality of an opposite kind in the whole of the advan- 
tages and disadvantages of the different employments of labour and 

It has been considered as of so much importance that a proper 
number of young people should be educated for certain professions, 
“ Ed. I reads “single member of it” here and in the next line. 


that, sometimes thef public, and sometimes the piety of private 
founders have established many pensions, scholarships, exhibitions, 
bursaries, &c. for this purpose, which draw many more people into 
those trades than could otherwise pretend to follow them. In all 
Christian countries, I believe, the education of the greater part of 
churchmen is paid for in this manner. Very few of them are edu- 
cated altogether at their own expence. The long, tedious, and ex- 
pensive education, therefore, of those who are, will not always pro- 
cure them a suitable reward, the church being crowded with people 
who, in order to get employment, are willing to accept of a much 
smaller recompence than what such an education would otherwise 
have entitled them to; and in this manner the competition of the 
poor takes away the reward of the rich. It would be indecent, no 
doubt, to compare either a curate or a chaplain with a journeyman 
in any common trade: The pay of a curate or chaplain, however, 
may very properly be considered as of the same nature with the 
wages of a journeyman. They are, all three, paid for their work ac- 
cording to the contract which they may happen to make with their 
respective superiors. Till after the middle of the fourteenth century, 
five merks, containing about as much silver as ten pounds of our 
present money, was in England the usual pay of a curate or-’- 
stipendiary parish priest, as we find it regulated by the decrees of 
several different national councils.'"*® At the same period four pence 
a day, containing the same quantity of silver as a shilling of our 
present money, was declared to be the pay of a master mason, and 
three pence a day, equal to nine pence of our present money, that of 
a journeyman mason.''"^ The wages of both these labourers, there- 
fore, supposing them to have been constantly employed, were much 
superior to those of the curate. The wages of the master mason, 
supposing him to have been without employment one third of the 
year, would have fully equalled them. By the 12 th of Queen Anne, 
c. 12, it is declared, “That whereas for want of sufficient mainte- 
nance and encouragement to curates, the cures have in .several places 
been meanly supplied, the bishop is, therefore, empowered to ap- 
point by writing under his hand and seal a sufficient certain stipend 
or allowance, not exceeding fifty and not than twenty pounds 
a year.” Forty pounds a year is reckoned at present very good pay 

“ Eds. 4 and s erroneously insert “a" here. 

“Accordinp; to Richard Burn’s Ecclesiastical Law, 1763, s.v. Curates, six 
marks was the pay ordered by a constitution of Archbishop Islip till 1378, 
when it was raised to eight. 

“See the Statute of labourers, 25 Ed. III. Below, p. 177. The note is not 
in ed. i. 

“The quotation is not intended to be verbatim, in spite of the inverted 


[or a curale, and notwithstanding this act of parliament, there are 
many curacies under twenty pounds a year. There are journeymen 
shoemakers in London who earn forty pounds a year, and there is 
scarce an industrious workman of any kind in that metropolis who 
does not earn more than twenty. This last sum indeed does not ex- 
ceed what is frequently earned by common labourers in many coun- 
try parishes. I^'henever the law has attempted to regulate the wages 
of workmen, it has always been rather to lower them than to raise 
them. But the law has upon many occasions attempted to raise 
the wages of curates, and for the dignity of the church, to oblige the 
rectors of parishes to give them more than the wretched mainte- 
nance which they ihemselves might be willing to accept of. And in 
both cases the law seems to have been equally ineffectual, and has 
never either been able to raise the wages of curates, or to sink those 
of labourers to the degree that was intended ‘because it has never 
been able to hinder either the one from being willing to accept of 
less than the legal allowance, on account of the indigence of their 
situation and the multitude of their competitors: or the other from 
receiving more, on account of the contrary competition of those who 
expected to derive either profit or pleasure from employing them. 

The great benefices and other ecclesiastical dignities support the 
honour of the church, notwithstanding the mean circumstances of 
some of its inferior members. The respect paid to the profession too 
makes some compensation even to them for the meanness of their 
pecuniary recompence. In England, and in all Roman Catholic 
countries, the lottery of the churdi is in reality much more ad- 
vantageous than is necessary. The example of the church of Scot- 
land, of Geneva, and of several other protestant churches, may 
satisfy us, that in so creditable a profession, in which education is 
so easily procured, the hopes of much more moderate benefices will 
draw a sufficient number of learned, decent, and respectable men 
into holy orders. 

In professions in which there are no benefices, such as law and 
physic, if an e^ual proportion of people were educated at the pub- 
lic expence, the competition would soon be so great, as to sink very 
much their pecuniary reward. It might then not be worth any man’s 
while to educate his son to either of those professions at his own ex- 
pence. They would be entirely abandoned to such as had been edu- 
cated by those public charities, whose numbers and necessities 
would oblige them in general to content themselves with a very 
miserable recompence, to the entire degradation of the now re- 
spectable professions of law and physic. 

That unprosperous race of men commonly called men of letters, 


is pretty much in tHe situation which lawyers and physicians prob- 
ably would be in upon the foregoing supposition. In every part of 
Europe the greater part of them have been educated for the church, 
but have been hindered by different reasons from entering into holy 
orders. They have generally, therefore, been educated at the public 
expence, and their numbers are every-where so great as commonly 
to reduce the price of their labour to a very paultry recompence. 

Before the invention of the art of printing, the only employment 
by which a man of letters could make any thing by his talents, was 
that of a public or private teacher, or by communicating to other 
people the curious and useful knowledge which he had acquired 
himself: And this is still surely a more honourable, a more useful, 
and in general even a more profitable employment than that other 
of writing for a bookseller, to which the art of printing has given oc- 
casion. The time and study, the genius, knowledge, and application 
requisite to qualify an eminent teacher of the sciences, are at least 
equal to what is necessary for the greatest practitioners in law and 
physic. But the usual reward of the eminent teacher bears no pro- 
portion to that of the lawyer or physician ; because the trade of the 
one is crowded with indigent people who have been brought up to it 
at the public expence ; whereas those of the other two are incum- 
bered with very few who have not been educated at their own. The 
usual recompence, however, of public and private teachers, .small 
as it may appear, would undoubtedly be less than it is. if the com- 
petition of those yet more indigent men of letters who write for 
bread was not taken out of the market. Before the invention of the 
art of printing, a scholar and a beggar seem to have been tcrni.s very 
nearly synonymous. The different governors of the universities be- 
fore that time appear to have often granted licences to their scholars 
to beg.-'' 

In ancient times, before any charities of this kind had been estab- 
lished for the education of indigent people to the learned profes- 
sion.s, the rewards of eminent, teachers appear to have been much 
more considerable. Isocrates, in what is called his discourse against 
the .sophists, reprn.Tches the teachers of his own times with incon- 
sistency. ‘‘Thej^ make the most magnificent promises to their schol- 
ars, says he, and undcrtalre to teach them to be wise, to be happy, 
and to be just, and in return for so important a service they stipu- 
late the paultry reward of four or five minEE, They who teach wis- 
dom, continues he, ought certainly to be wise themselves; but if 

“ Ed. I dors not contain “or private." 

'■ Hume, //iitor3F, ed. of 1773, vol. iii., p. 403, quotes ii Hen. VII., c. 22 , 
which forbids students to beg without permission from the chancellor. 


any man were to sell such a bargain for such k price, he would be 
convicted of the most evident folly.” ’’'® He certainly does not mean 
here to exaggerate the reward, and we may be assured that it was 
not less than he represents it. Four minre were equal to thirteen 
pounds six shillings and eight pence: five minse to sixteen pounds 
thirteen shillings and four pence. Something not less than the larg- 
est of those two sums, therefore, must at that time have been usually 
paid to the most eminent teachers at Athens. Isocrates himself de- 
manded ten minDe,''® or thirty-three pounds six shillings and eight 
pence, from each scholar. When he taught at .Athens, he is said to 
have had an hundred scholars. I understand this to be the number 
whom he taught at one time, or who attended what W'e would call 
one course of lectures, a number which will not appear extraordin- 
ary from so great a city to so famous a teacher, who taught too 
what was at that time the most fashionable of all sciences, rhetoric. 
He must have made, therefore, by each course of lectures, a thou- 
sand minse, or 3,333/. 6s. Sri. A thousand minse, accordingly, is said 
by Plutarch in another place, to have been his Didactron, or usual 
price of teaching.®^ Many other eminent teachers in those times ap- 
pear to have acquired great fortunes. Gorgias made a pre.sent to the 
temple of Delphi of his own .statue in .solid gold.'® We must not, I 
presume, suppose that it was as large as the life. His way of living, 
as well as that of Hippias and Protagoras, two other eminent teach- 
ers of those times, is represented by Plato as splendid even to os- 
tentation.'’-’ Plato himself is said to have lived with a good deal of 
magnificence. .Aristotle, after having been tutor to Alexander, and 
most munificently rewarded, as it k universally agreed, both by 
him and his father Philip,'” thought it worth while, notwithstand- 
ing, to return to .Athens, in order to resume the teaching of his 
school. Teachers of the sciences were probably in those times less 

Eds. 1-3 road ‘‘was.” 

™‘§§ J. 4. A very free but not incorrect translation. Arbuthnot, Tables of 
/indent Coins, Weishts and Measures, 2nd ed., 1754, p. 198. refers to but 
docs not quote th< passage as his authority for stating the reward of a sophist 
at four or five mina:. He treats the mina as equal to £3 4s. 7d., which at the 
rate of 62s. to the pound troy is considerably too low. 

” Plutarch, Demosthenes, c. v., § 3 ; Isocrates, § 30. 

“Arbuthnot, Tables of Ancient Coins, p. 198, says, “Isocrates had from 
bis disciples a didactron or reward of 1.000 mina;. £3,229 3s. 4d.,” and quotes 
“Plut. in Isocrate,” which says nothing about a “didactron," but only that 
Isocrates charged ten mina: and had 100 pupils. — §§ 9, 12, 30. 

“This story is from Pliny, H. N., xxxiii., cap. iv., who remarks, “Tantus 
erat docendae ov.atoriae quaestus,” but the commentators point out that 
earlier authorities ascribe the erection of the statue not to Gorgias, but to 
the whole of Greece. 

“It is difficult to discover on what passage this statement is based. 

“Plutarch, Alexander. 


common than they 'came to be in an age or two afterwards, when 
the competition had probably somewhat reduced both the price of 
their labour and the admiration for their persons. The most emin- 
ent of them, however, appear always to have enjoyed a degree of 
consideration much superior to any of the like profession in the 
present times. The Athenians sent Carneades the academic, and 
Diogenes the stoic, upon a solemn embassy to Rome; and though 
their city had then declined from its former grandeur, it was still 
an independent and considerable republic. Carneades too was a 
Babylonian by birth,®" and as there never was a people more jealous 
of admitting foreigners to public offices than the .\thenians, their 
consideration for him must have been very great. 

This inequality is upon the whole, perhaps, rather advantageous 
than hurtful to the public. It may somewhat degrade the profession 
of a public teacher; but the cheapness of literary education is 
surely an advantage which greatly over-balances this trilling incon- 
veniency. The public too might derive still greater benefit from, it, 
if the constitution of those schools and colleges, in which education 
is carried on, was more reasonable than it is at present through the 
greater part of Europe.®® 

Thirdly, The policy of Europe, by obstructing the free circulation 
of labour and stock both from employment to employment, and 
from place to place, occasions in some cases a very inconvenient in- 
equality in the whole of the advantages and disadvantages of their 
different employments. 

The statute of apprenticeship ®'^ obstructs the free circulation of 
labour from one employment to another, even in the same place. 
The exclusive privileges of corporations obstruct it from one place 
to another, even in the same employment. 

It frequently happens that while high wages are given to the 
workmen in one manufacture, those in another are obliged to con- 
tent themselves with bare subsistence. The one is in an advancing 
state, and has, therefore, a continual demand for new hands: The 
other is in a declining state, and the super-abundance of hands is 
continually increasing. Those two manufactures may sometimes be 
in the same town, and sometimes in the same neighbourhood, with- 
out being able to lend the least assistance to one another. The stat- 
ute of apprenticeship may oppose it in the one case, and both that 
and an exclusive corporation in the other. In many different manu- 
factures, however, the operations are so much alike, that the work- 

* This is a slip. Carneades was a native of Cyrene, and it was his col- 
league Diogenes who was a Babyloniar by birth. 

" Below, pp. 716-728. " Above, p. 120. 

men could easily change trades with one another, if those absurd 
laws did not hinder them. The arts of weaving plain linen and plain 
silk, for example, are almost entirelj' the same. That of weaving- 
plain woollen is somewhat different; but the difference is so in- 
significant, that either a linen or a silk weaver might become a 
tolerable workman in a very few daj’s. If any of those three capital 
manufactures, therefore, were decajdng, the workmen might find a 
resource in one of the other two which was in a more prosperous 
condition ; and their wages would neither rise too high in the thriv- 
ing, nor sink too low in the decaying manufacture. The linen manu- 
facture indeed is. in England, by a particular statute,®** open to 
every body; but as it is not mucli cultivated through the greater 
part of the country, it can afford no general resource to the work- 
men of other decaying manufactures, who, wherever the statute of 
apprenticeship takes place, have no other choice but either to come 
upon the parish, or to work as common labourers, for which, by 
their habits, they are much worse qualified than for any sort of 
manufacture that bears any resemblance to their own. They gen- 
erally, therefore, chuse to come upon the parish. 

Whatever obstructs the free circulation of labour from one em- 
ployment to another, obstructs that of stock likewise; the quantity 
of stock which can be employed in any branch of business depend- 
ing very much upon that of the labour which can be employed in 
it. Corporation laws, however, give less obstruction to the free cir- 
culation of stock from one place to another than to that of labour. 
It is every-where much easier for a wealthy merchant to obtain the 
privilege of trading in a town corporate, than for a poor artificer to 
obtain that of working in it. 

The obstruction which corporation laws give to the free circula- 
tion of labour is common, 1 believe, to every part of Europe. That 
which is given to it by the poor laws is, so far as I know,'® peculiar 
to England. It consists in the difficulty which a poor man finds in 
obtaining a settlement, or even in being allowed to exercise his 
industry in any^parish but that to which he belongs. It is the la- 
bour of artificers and manufacturers only of which the free circula- 
tion is obstructed by corporation laws. The difficulty of obtaining 
settlements obstructs even that of common labour. It may be worth 
while to give some account of the rise, progress, and present state of 
this disorder, the greatest perhaps of any in the police of England. 

When by the destruction of monasteries the poor had been de- 
prived of the charity of those religious houses, after some other in- 

“ 15 Car. II., c. 15. ”*£(1 1 docs not contain “the.” 

Ed. I places the “is” here. 


effectual altemplif for their relief, it was enacted by the 43d of 
Elizabeth, c. 2. that every parish should be bound to prowde for its 
own poor; and that overseers of the poor should be annually ap- 
pointed, who, with the church-wardens, should raise, by a parish 
rate, competent sums for this purpose. 

By this statute the necessity of providing for their own poor was 
indispensably imposed upon every parish. Who were to be con- 
sidered as the poor of each parish, became, therefore, a question of 
some importance. This question, after some variation, was at last 
determined by the 13th and r4th of Charles II."' when it was en- 
acted, that forty days undisturbed residence should gain any i^er- 
son a settlement in any parish ; but that within that time it should 
be lawful for two justices of the peace, upon complaint made by 
the churchwardens or overseers of the poor, to remove any new in- 
habitant to the parish where he was last legally settled ; unless he 
either rented a tenement of ten pounds a year, or could give such 
security for the discharge of the parish where he was then living, as 
those justices should judge sufficient. 

Some frauds, it is said, were committed in consequence of this 
statute; parish officers sometimes bribing their own poor to go 
clandestinely to another parish and by keeping themselves concealed 
for forty days to gain a settlement there, to the discharge of that to 
which they properly belonged. It was enacted, therefore, by the 1st 
of James II.'® that the forty days undisturbed residence of any per- 
son necessary to gain a settlement, should be accounted only from 
the time of his delivering notice in writing, of the place of his aliodc 
and the number of his family, to one of the churchwardens or over- 
seers of the parish where he came to dwell. 

But parish officers, it seems, were not always more honest with 
regard to their owm, than they had been with regard to other 

"C. 12. 

’°This account of the provisions of the Acts rcearcliiiE setllomcnt, lliouch 
not incorrect, inverts the order of the ideas which prompted them. The pre- 
amble complains that owing to defects in the law '‘ijodr people are not re- 
strained from going from one paiisli to another anti therelore do ende.ooiir 
to settle thcm-selves in tho^e parishes where there i-, llie bc-t ‘-li ck,” and -o 
forth, and tlie . 4 ct therefore gi\c~ the ju-ticcs ])ower, “within foil\ da>-' 
after any such person or persons coming so to settle as aforesaid,” to 
them “to such parish where he or they were last legally settled either as a 
native, householder, sojourner, apprentice or servant for the space of fmly 
days at the least,” The use of the term “settlement” seems to have originated 
with this .^ct. 

C. 17. “An act for reviving and continuance of several acts.” The reason 
given is that “such poor persons at their first coming to a parish do rom- 
monly conceal themselves.” Nothing is said either here or in Hum’s Poor 
Law or Justice of the Peace about parish officers bribing their poor to go to 
another parish. 


paiishes, and sometimes connived at such intrusions, receiving the 
notice, and takina; no proper steps in conseciuence of it. As every 
person in a parish, therefore, was supposed to have an interest to 
prevent as much as possible their being burdened by '-uch intruders, 
it was further enacted by the ,^d of William III.'' that the forty 
days residence .should be accounted only from the publication of 
such notice in wi iting on Sunday in the church, immediately after 
divine service. 

'•.•\ftpr all.” .s. 3 y.s Doctor Burn, ‘This kind of .settlement, by con- 
tinuing forty day=: after publication of notice in writing, is very sel- 
dom obtained : and the design of the acts is not so much for gaining 
of settlements, as fi ir the a\ oiding of them by persons coming into a 
parish cl:indeslincl5’: for the gi\ing of notice is only luilting a force 
upon the parish to reintne. But if a person's situation i.s such, that 
it is doubtful whether he i.s actually removeable or not, he shall by 
giving of notice comiiel the parish cither to allow him a settlement 
uncontested, by suffering him to continue forty days; or, by remov- 
ing him, to fry the right.” 

This statute, therefore, rendered it almost impracticaldo for a 
poor man to gain a new settlement in the old way, by forty days in- 
habitancy. But that it might not appear to preclude altogether the 
common people of one parish from ever estal)lishing themselves 
with security in another, it appointed four other 'ft’ays by which a 
settlement might be gained without any notice delivered or pub- 
lished. The first was, by being taxed to parish rates and paying 
them' the second, by being elected into an annual ]) office, and 
serving in it a year; the third, by serving an apprenticeship in the 
parish; the fourth, by lieing hired into service there for a year, and 
contimdng in the same service tluring the whole of it.'" 

Nobody can gain a settlement by either of the tsvo first ways, but 
by the public deed of the whole parish, who are too well aware of the 
consequences to adopt any new'-comer who has nothing but his la- 
bour to support him, either by taxing him to parish rates, or by 
electing him intf) a parish office. 

No married man can well gain any settlement in either of the two 
last ways. An apprentice is .scarce ever married; and it is expressly 
enacted, that no married servant shall gain any settlement by being 
hired for a year.^^ The principal effect of introducing settlement by 
service, has been to put out in a great measure the old fashion of 

” S W. and M., c. ii, § 3 . 

’“Richard Burn, Justice of the Peace, 1764, vol. ii., p. 233. 

§§ 6 , 8 . 

” § 7 confines settlement by service to unmarried persons without chil- 

138 the wealth op NATIONS 

hiring for a year, which before had been so customary in England, 
that even at this day, if no particular term is agreed upon, the law 
• intends that every seivant is hired for a year. But masters are not 
always willing to give their servants a settlement by hiring them in 
this manner, and servants are not always willing to be so hiied, be- 
cause, as every last settlement discharges all the foregoing, they 
might thereby lose their original settlement in the places of their 
nativity, the habitation of their parents and relations 

No independent workman, it is evident, whether labourer or 
artificer, is likely to gam any new settlement either by apprentice 
ship or by service When such a person, therefoie, carried hia in- 
dustry to a new parish, he was liable to be removed, how healthy 
and industnous soever, at the caprice of any churchwarden or over- 
seer, unless he either rented a tenement of ten pounds a yeai a 
thing impossible tor one who has nothing but his laboui to live by 
or could give such security for the discharge of the parish as two 
justices of the peace should judge sufficient. What security they 
shall require, indeed is left altogether to their discretion , but they 
cannot well require less than thirty pounds, it having been enacted, 
that the purchase even of a freehold estate of less than thirty pound*, 
value, shall not gain any person a settlement, as not being sulficient 
for the dischuge of the parish But this is a security which scarce 
any man who liv es by labour can give , and much greater seem ity is 
frequently demanded. 

In order to restore in some measure that free circulation of la- 
bour which those different statutes had almost entirely taken 
away,''*’ the invention of certificates was fallen upon By the 8th and 
9th of William III it was enacted, that if any person should 

™B\ 9 Gto I c 7 

""The \<.t 15 14 Car II , c 12, giving the justices power to lemove the 

immigrant within foity dajs was ccrtainlj ob-tructivc to the fice circuhtion 
of labour, but the other statutes referred to in the text bi ni iking the at 
tamment of a settlement moic difficult, would appear to hiv midc it Ics-. 
necessary lor a parish to put in force the power ol removal ind tli-rcfoic to 
have aSsi'ted r.uher than obstructed the fice circulation oj labour The pi 01 
law commissioners of 1834, long aftei the power of icmov il bid been ibol 
ished in 1793, found the law of settlement a gicat obstruction to th' free 
circulation of labour, because men were afraid of gaming a new s.,ttlemcnt, 
not because a new settlement was denied them 

“C 30, “All act for supplying some defects in the laws for the relief of 
the poor of this kingdom ” The preamble recites, “Forasmuch as mans poor 
persons chargeable to the parish, township or place where they live 
for want of work, would in any other place when sufficient employment is 
to be had maintain themselves and families without being burdensomr to 
any paiish, township or place” But certificates were invented long be lore 
this The Act 13 & 14 Car II , c 12, provides for their issue to persons going 
into another pansh for harvest or any other kind of work, and the preamble 
of 8 & 9 W III , c 30, shows that they were commonly given Only tempo- 


bring a certificate from the parish where he was last legally settled, 
subscribed by the churchwardens and overseers of the poor, and al- 
lowed by two justices of the peace, that every other parish should 
be obliged to receive him ; that he should not be rcmoveable merely 
upon account of his being likely to become chargeable, but only up- 
on his becoming actually chargeable, and that then the parish which 
granted the certificate should be obliged to pay the expence both of 
his maintenance and of his removal. And in order to give the most 
perfect security to the parish where such certificated man should 
come to reside, it was further enacted by the same statute,**’ that 
he should gain no settlement there by any means whatever, except 
either by renting a tenement of ten pounds a year, or by serving 
upon his own account in an annual parish office for one whole year; 
and consequently neither by notice, nor by service, nor by appren- 
ticeship, nor by paying parish rates. By the rath of Queen Anne too, 
stat. I. c. 1 8 . it was further enacted, that neither the servants nor 
apprentices of such certificated man should gain any settlement in 
the parish where he resided under such certificate.'’^ 

How far this invention has restored that free circulation of la- 
bour which the preceding statutes had almost entirely taken away, 
we may learn from the following very judicious observation of Doc- 
tor Burn. “It is obvious,” says he, “that there are divers good rea- 
sons for requiring certificates with persons coming to settle in any 
place ; namely, that persons residing under them can gain no settle- 
ment, neither by apprenticeship, nor by service, nor by giving no- 
tice, nor by paying parish rates ; that they can settle neither appren- 
tices nor servants: that if they become chargeable, it is certainly 
known whither to remove them, and the parish shall be paid for the 
removal, and for their maintenance in the mean time; and that if 
they fall sick, and cannot be removed, the parish which gave the 
certificate must maintain them: none of all which can be without 
a certificate. Which reasons will hold proportionably for parishes 
not granting certificates in ordinary cases; for it is far more than 
an equal chan^e, but that they will have the certificated persons 
again, and in a worse condition.” The moral of this observation 
seems to be, that certificates ought always to be required by the 
parish where any poor man comes to reside, and that they ought 
very seldom to be granted by that which he proposes to leave. 

raiy employment, however, was contemplated, and, on the expiration of the 
job, the certificated person became removable. 

“Rather by the explanatory Act, 9 & lo W. Ill , c. ii. 

“All these statutes are conveniently collected in Richard Burn’s History 
of the Poor Laws, 1764, pp. 94-100 

“Bum, Justice of the Peace, 1764, vol. ii., p. 274. 

140 the wealth of nations 

“There is somewh'at of hardship in this iiialter of certificates,” 
says the same very intelligent Author, in his History of the Poor 
'Laws, “by putting it in the power of a parish officer, to imprison a 
man as it were for life ; however inconvenient it may be for him to 
continue at that place where he has had the misfortune to acquire 
what is called a settlement, or whatever advantage he may propose 
to himself by living elsewhere.” 

Though a certificate carries along with it no testimonial of good 
behaviour, and certifies nothing but that the person belongs to the 
parish to which he really does belong, it is altogether discretionary 
in the parish officers either to grant or to refuse it. A mandamus was 
once moved for, says Doctor Burn, to compel the churchwardens 
and overseers to sign a certificate; but the court of King’s Bench 
rejected the motion as a very strange attempt.*’"’ 

The very unequal price of labour which we frequently find in 
England in places at no great distance from one another, is prob- 
ably owing to the obstruction which the law of settlements gives to 
a poor man who would carry his industry from one parish to an- 
other without a certificate. A single man, indeed, who is healthy and 
industrious, may sometimes reside by sufferance without one; but 
a man with a wife and family who should attempt to do so, would in 
most parishes be sure of being removed, and if the single man 
should afterwards marry, he would generally be removed liliewise."'’ 
The scarcity of hands in one parish, therefore, cannot always be re- 
lieved by their superabundance in another, as it is constantly in 
Scotland, and, I believe, in all other countries where there is no 
difficulty of settlement. In such countries, thouuh wages may some- 
times rise a little in the neighbourhood of a great town, or wherever 
else there is an extraordinary demand for labour, and sink gradu- 
ally as the distance from such places increases, till they fall back to 
the common rate of the country; yet we never meet with those sud- 
den and unaccountable differences in the wages of neighbouring 
places which we sometimes find in England, where it is often more 
difficult for a poor man to pass the artificial boundary of a parish, 
than an arm of the sea or a ridge of high mountains, natural bound- 
aries which sometimes separate very distinctly different rates of 
wages in other countries. 

“ Bum, History of the Poor Laws, 1764, pp. 235, 236, where it is observed 
that “it was the easy method of obtaining a settlement by a residency of 
forty days that brought parishes into a state of war against the poor and 
against one another,” and that if settlement were reduced to the place of 
birth or of inhabitancy for one or more years, certificates would be got rid of. 

“Burn, Justice, vol. ii., p. 209. The date given is 1730. 

_ Since the fact of the father having no settlement would not free the par- 
ish from the danger of having at some future time to support the children. 



To remove a man who has committed no misdemeanour from the 
parish where he chuses to reside, is an evident violation of natural 
liberty and justice. The common people of England, howc\ cr, so 
jealous of their liberty, but like the common people of most other 
countries never rightly understanding wherein it consists, have now 
for more than a century together suffered themselves to be e.xposed 
to this oppression tvithout a remedy. Though men of reflection too 
have sometimes complained of the law of settlements as a public 
grievance; yet it has never been the object of any general popular 
clamour, such as that against general warrants, an abusive prac- 
tice undoubtedly, but such a one as was not likely to occasion any 
general oppression. There is scarce a poor man in England of forty 
years of age, I will venture to say, who has not in some part of his 
life felt himself most cruelly oppressed by this ill-contrived law 
of settlements. 

I shall conclude this long chapter with observing, that though an- 
ciently it was usual to rate wages, first by general laws extending 
over the whole kingdom, and afterwards by particular orders of the 
justices of peace in every particular county, both these practices 
have now gone entirely into disuse. “By the experience of above four 
hundred years,” says Doctor Burn, “it seems time to lay aside all 
endeavours to bring under strict regulations, what in its own nature 
seems incapable of minute limitation: for if all persons in the same 
kind of work were to receive equal wages, there would be no emu- 
lation, and no room left for industry or ingenuity.” 

Particular acts of parliament, however, still attempt sometimes 
to regulate wages in particular trades and in particular places. Thus 
the 8th of George III.*® prohibits under heavy penalties all master 

Sorao evidpnee in support of this as'crtion would have been acceptable. 
Sir Frederic M. Eden, Stale of the Poor, 1707, vol. i., pp. aoS-agS, may be 
consulted on the other side. William Hay’s Remarks on the Lasvs Relating 
to the Poor, 17:, 3, which Eden rcRards as giving a very exaggerated view of 
the obs| ruction cau.sed by the law of settlement, was in the Edinburgh Ad- 
vocates’ Library in 1776, and Adam Smith may have seen it. 

'"'History of tlte Poor Laias. p. 130, loosely quoted. After ‘‘limitation” the 
passage runs, “as thereby it leaves no room for industry or ingenuity ; for if 
all persons in the same kind of work were to receive equal wages there would 
be no emulation.’’ 

7 Geo. I., stat. i, c. 13, was passed, according to its preamble, because 
journeymen taylors had lately departed from their service without just 
cause, and had entered into ‘‘combinations to advance their wages to un- 
reasonable prices, and lessen their usual hours of work, tvhich is of evil ex- 
ample, and manifestly tends to the prejudice of trade, to the encouragement 
of idleness, and to the great increase of the poor.” It prescribed hours, 6 A.u. 
to S P.M., and wages, as. a day in the second quarter and is. 8d. for the rest 
of the year. Quarter sessions might alter these rates. This Act was amended 
by 8 Geo. III., c. 17, under which the hours were to be 5 A.M. to 7 P.M., Md 
wages a maximum of as. 7i d. a day. Masters inside the area were foiWd- 

142 the wealth of nations 


taylors in London, and five miles round it, from giving, and their 
workmen from accepting, more than two shillings and sevenpence 
"halfpenny a day, except in the case of a general mourning. When- 
ever the legislature attempts to regulate the differences between 
masters and their workmen, its counsellors are always the masters. 
When the regulation, therefore, is in favour of the workmen, it is 
always just and equitable; but it is sometimes otherwise when in 
favour of the masters. Thus the law which obliges the masters in 
several different trades to pay their workmen in money and not in 
goods, is quite just and equitable.**'’ It imposes no real hardship 
upon the masters. It only obliges them to pay that value in money, 
which they pretended to pay, but did not always really pay, in 
goods. This law is in favour of the workmen ; but the 8th of George 
III. is in favour of the masters. When masters combine together in 
order to reduce the wages of their workmen, they commonly enter 
into a private bond or agreement, not to give more than a certain 
wage under a certain penalty. Were the workmen to enter into a 
contrary combination of the same kind, not to accept of a certain 
wage under a certain penalty, the law would punish them very se- 
verely; and if it dealt impartially, it would treat the masters in 
the same manner. But the 8th of George III. enforces by law that 
very regulation which masters sometimes attempt to establish by 
such combinations. The complaint of the workmen, that it puts the 
ablest and most industrious upon the same footing with an ordinary 
workman, seems perfectly well founded. 

In ancient times too it was usual to attempt to regulate the profits 
of merchants and other dealers, by rating the price both of provis- 
ions and other goods. The assize of bread is, so far as I know, the 
only remnant of this ancient usage. Where there is an exclusive cor- 
poration, it may perhaps be proper to regulate the price of the first 
necessary of life. But where there is none, the competition will 
regulate it much better than any assize. The method of fixing the 
assize of bread established by the 31st of George II.'” could not be 
put in practice in Scotland, on account of a defect'’ in the law; its 
execution depending upon the office of clerk of the market, w'hich 
does not exist there. This defect was not remedied till the 3d of 

den to pa\ more to workers outside the area than was allowed by the Act 
within it. 

■* I Ann , 'tat 2, c, 18, applied to workmen in the woollen, linen, fustian, 
cotton and iron manufacture: 13 Geo. II., c. 8, to manufacturers of rIovcs, 
boots, shoes and other leather wares. The second of these Acts only prohibits 
truck payments when made without the request and consent of the work- 

C. 29. 



George III.®* The want of an assize occasioned no sensible incon- 
veniency, and the establishment of one in the few places where it 
has yet taken place, has produced no sensible advantage. In the 
greater part of the towns of Scotland, however, there is an incorpo- 
ration of bakers who claim exclusive privileges, though they are not 
very strictly guarded. 

;jThe proportion between the different rates both of wages and 
jStjfit in the different employments of labour and stock, seems not 
to be much affected, as has already been observed,®* by the riches 
or poverty, the advancing, stationary, or declining state of the so- 
ciety. Such revolutions in the public welfare, though they affect the 
general rates both of wages and profit, must in the end affect them 
equally in all different employments. The proportion between them, 
therefore, must remain the same, and cannot well be altered, at 
least for any considerable time, by any such revolutions. 

“ C. 6. The preamble relates the defect. “ Above, p. 63. 



Rent, considered as the price paid for the use of land, is naturally 
the hit'hest which the tenant can afford to pay in tlje actual cir- 
cunisUincefi of the land. In adjusting the terms of the lease, the 
landlord endeavouts to leave him no greater share of the produce 
than uhaf '-ufficient to keep up the slock from which he furnishes 
the ."eed, pay, the labour, and purchases anil maintains the cattle 
and other in.‘,triiments of husbanrlry, together with the ordinary 
I)[otit.c of farming stock in the neighbourhood. This is evidently the 
smallest dune with which the tenant can content himself without 
Ijc/ftg a loser, and the landlord seldom means to leave him any 
more. Whatever part of the prodiue, or. what is the .'dnie thing, 
whatever part of it"- piiie, is over am! above this share, he naturally 
cndeavoui.s to re-erve to himself as the rent of his land, which is 
evidently the highest the tenant laii aftiird to pay in the actual 
circumstances of the land. Sometimes, indeed, the liberality, more 
frc(|uenlly the igtiorance, oi the landlord, makes him accept of 
somewhat less than this portion; and .sometimes too. though more 
rarely, the ignorance of the tenant makes him undertake to pay 
.somewhat more, or to cuiileut himself with somewhat less, than the 
ordinary profits of farming stmk in the neighbourhood, rhis por- 
tion, however, may still be considered as the natural rent of land, 
or the rent for which it is naturally meant that land should for the 
most [larl be lei, 

'I’he rent of land, it may he thought, is freiiuenlly no move than lI 
rea.s()n;il)lc profit tir interest for the stock laid out by the landlord 
upon its iiiiproiemcnl. 'Phis, no doubt, may be partly the case upon 
.some oc( a.siuns, for it can scarce ever be more than partly the case, 
'I’he landlord deinaiids a rent even for unimproved land, and the 
.suitposed or profit upon the e.xpencc of improvement is 
geiieially an addition to this original rent. Those improvements, 
beside.s, are not alway.s made by the stock of the landlord, but 
sometimes by that of (he tenant. When the lease comes to be re- 


newed, however, the landlord commonly demands the same aug- 
mentation of rent, as if they had been all made by his own. 

He sometimes demands rent for what is altogether incapable of • 
human improvement. Kelp is a species of sea-weed, which, when 
burnt, yields an alkaline salt, useful for making gla.>s. soap, and for 
several other purposes. It grows in several parts of Great Britain, 
particularly in Scotland, upon such rocks only as lie within the high 
water mark, which are twice every day covered with the sea, and of 
which the produce, therefore, was never augmented by human in- 
dustry. The landlord, however, rvhose estate is bounded by a kelp 
shore of this kind, demands a rent for it as much as for his corn 

The sea in the neighbourhood of the islands of Shetland is more 
than commonly abundant in fish, which make a great part of the 
subsistence of their inhabitants. But in order to profit by the pro- 
duce of the water, they must have a habitation upon the neighbour- 
ing land. The rent of the landlord is in proportion, not to what the 
farmer can make by the land, but to what he ran make both by 
the land and by ’ the water. It is partly paid in sea-fish; and one 
of the very few instances in which rent makes a part of the price 
o£ that commodity, is to be found in that country. 

[The rent of land, therefore, considered as the price paid for the 
use of the land, is naturally a monopoly price. It is not at all pro- 
portioned to what the landlord may ha\’e laid out upon the im- 
* provement of the land, or to what he can afford to take; but to 
what the farmer can afford to give* 

Such parts only of the produce of land can commonly be brought 
to market of which the ordinary price is sufficient to replace the 
stock which must be employed in bringing them thither, together 
with its ordinary profits. If the ordinary price is more than this, the 
surplus part of it will naturally go to the rent of the land. If it is 
not more, though the commodity may be brought to market, it can 
afford no rent to the landlord. AATiether the price is, or is not more, 
depends upon the demand. 

There are some parts of the produce of land for which the de- 
mand must always be such as to afford a greater price than what is 
sufficient to bring them to market; and there are others for which it 
either may or may not be such as to afford this greater price. The 
former must always afford a rent to that landlord. The latter some- 
times may, and sometimes may not, according to different circum- 

I Rent, it is to be observed, therefore, enters into the composition 
'“By” appears first in ed. 3 . 

146 IHE wealth of NATIONS 

of the price of commodities in a different way from wages and 
profit. High or low wages and profit, are the causes of high or low 
price; high or low rent is the effect of it. It is because high or low 
wages and profit must be paid, in order to bring a particular com- 
modity to market, that its price is high or low. But it is because its 
price is high or low; a great deal more, or very little more, or no 
more, than what is sufficient to pay those wages and profit, that it 
affords a high rent, or a low rent, or no rent at alljf 
The particular consideration, first, of those parts of the produce 
of land which always afford some rent; secondly, of those w'hich 
sometimes may and sometimes may not afford rent ; and, thirdly, of 
the variations which, in the different periods of improvement, nat- 
urally take place, in the relative value of those two different sorts 
of rude produce, when compared both with one another and with 
manufactured commodities, will divide this chapter into three 

Part I 

Of the Produce, of Laud which always affords Rent 

As men, like all other animals, naturally multiply in proportion to 
the means of their subsi.stencc, food is always, more or less, in de- 
mand. It can alw.ays purchase or command a greater or smtiller 
quantity of labour, and somelxtdy can always be found who is will- 
ing to do something in order to obtain it. The (luantity of labour, 
indeed, which it can purchase, is not always equal to what it cotiLl 
maintain, if managed in the most ceconomical manner, on ai count 
of the high wages which are sometimes given to labour. But it rtin 
always purchase such a quantity of labour as it can mainttiin, ac- 
cording to the rale at which that sort of labour is commonly main- 
tained in the neighbourhood. 

But land, in any .situation, produces a grcixtcr quantity of 
food than what is sufficient to maintain all the labour necessary for 
bringing it to market, in the most liberal way in which that labour 
is ever maintained. The surplus too is always more than sufficient 
to replace the stock which employed that labour, together with its 
profits. Something, therefore, dways remains for a rent to the land- 

The most desart moors in Norway and Scotland produce some 
sort of pasture for cattle, of which the milk and the increase are 



always more than siuTicient. not only to m untam all ih? ^abowt 
necessary for tondn^ them and to pa> the irdlnatN [tiofu to tl» 
fanner or onncr of the herd or floe I., hut ti’ m'otd '•onu- vmaH tent"' 
to the landlord. Toe rent increases in pt 'p et'on to the s; cutnessioJ 
the pasture. The s<imc extent of utound not onlv nivt Hints a stteat- 
er number of cattle, but as thee are biinuhl within t stnallet tom- 
pass, le.'s labour becomes rettuisPe t'* tctul ihen, and tv> collecf 
their produee Tlte landlord uaius >ioth w.»ys. i>\ the increstae of the 
produce, and by the diminution of the lab'nn which must be ntain- 
tained out of it. 

The tent ed laud not oidy \,>‘ies with its fet ility, whateier he 
its ptoduce, but with its suivcin. whaK\e« he its tettilit\ - T-and 
in the ni inhbourhex'd o! a tc>wn ui\es a jtre.tlei uni thin land 
equally fertile in a distant pall oi the loiusttx Though it ma.\ cost 
no more labinu to cult bate the one th.m the othet, it must ahvaj's 
cost mote to Inins' tlie I'soduce of the distant land to muhet .\ 
greater (iiuntity ol laboni. thetefote. must be mainhtins'd mit ot it. 
and the sutplus, funn which aie duiwn both the ptotU ot the t tun- 
er and the rent ot the landlotd. must he diniimsht .1 Hat in leiunte 
paits of the countty the tale ot ptofUs, as has aht u)> been ihsiwn.* 
is geneially higher than in the tieu’hbourhood ot a huge tsswn, \ 
“Smaller proportion of this dintinidteil sntphis, Ihetelote, must Isp- 
long to the landlord, 

Ciood roads, catiaK, and naxigalde tixeis, by diminisliing the 
e.\pence of cauiage, put the temole paits ui the unmtry mote neat- 
ly upon a level with those in the neighboitthood ol llie town. They 
are upon that account the I'teatiM ot all Imitiovtincnl . They en- 
courage the cultivation of the umole, wltiih niiisl alwajs be (he 
most extensile circle of tlte cottntiy. Thiy ate aiK intat's'iiti to (he 
town, by htettkiitg down the momi|joly ol (he Loiiitliy in its m igh 
bout hood. They ate advatst igeoiis even to pail ol Ihe Liuintiv 
Though they introduce some lival toniinodilips into the old ntiii 
ket. they tspeti many new maiket“ to its luodme .Monopoly, be- 
sides, is a gical enemy to good management, which tan never bo 
univeisally established but in lonsequeme of that Iree and uni- 
versal competition which forces cveiybody to have lecotiise to if 
for the sake of .self-defence. It is not more than fifty years ago, that 
some of the counties in the ncighlmurbood ttf London petitioned 
the parliament against the extension of the turnpike roads into the 
remoter counties. Those remoter counties, they pictended, front the 

“ Eds I and 2 read “The rent of land varies with its fertility, whatever b« 
its produce, and with its situation, whatever be its fertility." 

' Above, pp. 89, 90. 


tries so populous, that the whole territory, like the lands in the 
neighbourhood of a great town, has not been sufficient to produce 
•both the grass and the corn necessary for the subsistence of their 
inhabitants. Their lands, therefore, have been principally em- 
ployed in the production of grass, tlie more bulky commodity, and 
which cannot be so easily brought from a great distance; the corn, 
the food of the great body of the people, has been chiefly imported 
from foreign countries. Holland is at present in this situation, and a 
considerable part of ancient Italy seems to have been so during the 
prosperity of the Romans. To feed well, old Cato said, as we are 
told by Cicero, was the first and most profitable thing in the man- 
agement of a private estate; to feed tolerably well, the second; and 
to feed ill, the third. To plough, he ranked only in the fourth place 
of profit and advantage.^ Tillage, indeed, in that part of ancient 
Italy which lay in the neighbourhood of Rome, must have been 
very much discouraged by the distributions of corn which were fre- 
quently made to the people, either gratuitously, or at a very Iqw 
price. This corn was brought from the conquered provinces, d.f 
which several, instead of taxes, were obliged to furnish a tenth part 
of their produce at a stated price, about sixpence a peck, to the re- 
public.'^ The low price at which this corn was distributed to the 
people, must necessarily have sunk the price of what could be 
brought to the Roman market from Latium, or the ancient terri- 
tory of Rome, and must have discouraged its cultivation in that 

In an open country too, of which the principal produce is corn, a 
well-enclosed piece of grass will frequently rent higher than any 
corn field in its neighbourhood. It is convenient for the mainten- 
ance of the cattle employed in the cultivation of the corn, and its 
high rent is, in this case, not so properly paid from the value of its 
own produce, as from that of the corn lands which are cultivated 
by means of it. It is likely to fall, if ever the neighbouring hmds are 
completely enclosed. The present high rent of enclosed land in 
Scotland seems owing to the scarcity of enclosure, and will prob- 
ably last no longer than that scarcity. The advantage of enclosure 
is greater for pasture than for corn. It saves the labour of guarding 
the cattle, which feed better too when they are not liable to be dis- 
turbed by their keeper or his dog. 

But where there is no local advantage of this kind, the rent and 
profit of corn, or whatever else is the common vegetable food of the 

* Cicero, De officiis, lib. ii. ad fin. Quoted in Lectures, p. 229. 

’’ See below, pp. 218, 219. 


people, must naturally regulate, upon the land which is fit for pro- 
ducing it, the rent and profit of pasture. 

The use of the artificial grasses, of turnips, carrots, cabbages, * 
and the other expedients which have been fallen upon to make an 
equal quantity of land feed a greater number of cattle than when 
in natural grass, should somewhat reduce, it might be expected, the 
superiority which, in an improved country, the price of butcher's- 
meat naturally has over that of bread. It seems accordingly to have 
done so: and there is some reason for believing that, at least in the 
London market, the price of butcher ’s-meat in proportion to the 
price of bread, is a good deal lower in the present times than it was 
in the beginning of the last cehtury. 

In the appendix to the Life of Prince Henry. Doctor Birch has 
given us an account of the prices of butcher’s-meat as commonly 
paid by that prince. It is there said that the four quarters of an ox 
weighing six hundred pounds usually cost him nine pounds ten 
shillings, or thereabouts; that is, thirty-one shillings and eight 
pence per hundred pounds weight.-'' Prince Henry died on the 6th of 
November 1612, in the nineteenth year of his age." 

In March 1764, there was a parliamentary inquiry into the 
causes of the high price of provisions at that time. It was then, 
among other proof to the .same purpose, given in evidence by a \’ir- 
ginia merchant, that in Jlarch 1763, he had victualled his ships for 
twenty-four or twenty-five shillings the hundred weight of beef, 
which he considered as the ordinary price; whereas, in that dear 
year, he had paid twenty-seven shillings for the same weight .-md 
sort.^" This high price in 1 764 is, however, four shillings and eight 
pence cheaper than the ordinary price paid by prince Henry; and 
it is the best beef only, it must be observed, which is fit to be salted 
for those distant voyages. 

The price [laid by prince Henry amounts to per pound 
weight of the whole carcase, coarse and choice pieces taken togeth- 
er; and at that rate the choice pieces could not have been sold by 
retail for less than 4UI. or ^d. the pound. 

In the parliamentary inquiry in 1764, the w’itness stated the 

“ The Life of Henry Prince of Wales, by Thomas Birch, D.D., 1760, p. 346. 

° Ibid., p. 271. 

A Report from the Committee who, upon the Slh day of February, 1764, 
were appointed to inquire into the Causes of the High Price of Provisions with 
the proceedings of the House thereupon. Published by order of the House of 
Commons, 1764, paracraph 4, where, however, there is no definite statement 
to the effect that tlie Virginia merchant, Mr. Capcl Hanbury, considered 24s. 
or 25s. as the ordinary price. 

IS2 the wealth of nations 

price of the choice pieces of the best beef to be to the consumer i^d. 
and the pound; and the coarse pieces in general to be from 
seven farthings to 2^d. and 2^d.; and this they said was in general 
one half-penny dearer than the same sort of pieces had usually been 
sold in the month of IMarch.^^ But even this high price is still a 
good deal cheaper than what we can well suppose the ordinary re- 
tail price to have been in the time of prince Henry. 

During the twelve first years of the last century, the average 
price of the best wheat at the Windsor market was il. iS^. the 
quarter of nine Winchester bushels. 

But in the twelve years preceding 1764, including that year, the 
average price of the same measure of the best wheat at the same 
market was 2I. is. 

In the twelve first years of the last century, therefore, wheat ap- 
pears to have been a good deal cheaper, and butcher's-meat a good 
deal dearer, than in the twelve years preceding 1764, including that 

In all great countries the greater part of the cultivated lands are 
employed in producing either food for men or food for cattle. The 
rent and profit of these regulate the rent and profit of all other cul- 
tivated land. If any particular produce afforded less, the land 
would soon be turned into corn or pasture; and if any afforded 
more, some part of the lands in corn or pasture would soon be 
turned to that produce. 

Those productions, indeed, which require either a greater orig- 
inal expence of improvement, or a greater annual expence of culti- 
vation. in order to fit the land for them, appear commonly to af- 
ford, the one a greater rent, the other a greater profit than corn or 
pasture. This superiority, however, will seldom be found to amount 
to more than a reasonable interest or compensation for this superior 

In a hop garden, a fruit garden, a kitchen garden, both the rent 
of the landlord, and the profit of the farmer, are generally greater 
than in a corn or grass field. But to bring the ground into this con- 
dition requires more expence. Hence a greater rent becomes due to 
the landlord. It requires too a more attentive and skilful manage- 
ment. Hence a greater profit becomes due to the farmer. The crop 
too, at least in the hop and fruit garden, is more precarious. Its 

“ Report from the Committee, paragraph 3 almost verbatim. The Commit- 
tee resolved that the high price of provisions of late has been occasioned 
partly by circumstances peculiar to the season and the year, and partly by thi. 
defect of the laws in force for convicting and punishing all persons con- 
cerned in forestalling cattle in their passage to market.” 

“ These prices are deduced from the tables at the end of the chapter. 


price, therefore, besides compensating all occasional losses, must 
afford something like the profit of insurance.^® The circumstances 
of gardeners, generally mean, and always moderate, may satisfy us 
that their great ingenuity is not commonly over-recompenced. Their 
delightful art is practised by so many rich people for amusement, 
that little advantage is to be made by those who practise it for 
profit; because the persons who should naturally be their best 
customers, supply themselves with all their most precious produc- 

The advantage which the landlord derives from such improve- 
ments seems at no time to have been greater than what was suffi- 
cient to compensate the original expence of making them. In the an- 
cient husbandry, after the vineyard, a well-watered kitchen garden 
seems to have been the part of the farm which was supposed to 
yield the most valuable produce. But Democritus, who wrote upon 
husbandry about two thousand years ago, and who was regarded by 
the ancients as one of the fathers of the art, thought they did not act 
wisely who enclosed a kitchen garden. The profit, he said, would not 
compensate the expence of a stone wall; and bricks (he meant, I 
suppose, bricks baked in the sun) mouldered with the rain, and the 
winter storm, and required continual repairs. Columella, who re- 
ports this judgment of Democritus, does not controvert it, but pro- 
poses a very frugal method of enclosing with a hedge of brambles 
and briars, which, he says, he had found by experience to be both a 
lasting and an impenetrable fence; but which, it seems, was not 
commonly l;nown in the time of Democritus. Palladius adopts the 
opinion of Columella, which had before been recommended by Var- 
ro.^® In the judgment of those ancient improvers, the produce of a 
kitchen garden had, it seems, been little more than sufficient to pay 
the extraordinary culture and the expence of watering ; for in coun- 
tries so near the sun, it was thought proper, in those times as in the 
present, to have the command of a stream of water, which could be 
conducted to every bed in the garden. Through the greater part of 
Europe, a kitchen garden is not at present supposed to deserve a 
better enclosure than that recommended by Columella. In Great 
Britain, and some other northern countries, the finer fruits cannot 

“Only if the extra risk deters people from entering the business, and ac- 
cording to pp. no, III above it would not. 

“ Ed. I reads “thorns.” 

“ Columella, De re ntslica, ,\i., 3, but Uic recommendation of the fence is 
“Et haec quidem claudendi horti ratio maxime est antiquis probata." 

“ Gesnerus’ edition of Columella in Scriptores rei nisticae in Adam Smith’s 
library (see Bonar’s Catalogue, s.v. Gesnerus), commenting on the passage re- 
ferred to above, quotes the opinions of Varro, De re rustica, i., 14, and Pal- 
ladius, De re rustica, i., 34. 


be brought to perfection but by the assistance of a wall. Their price, 
therefore, in such countries, must be sufficient to pay the expence 
of building and maintaining what they cannot be had without. The 
fruit-wall frequently surrounds the kitchen garden, which thus en- 
joys the benefit of an enclosure which its own produce could seldom 
pay for. 

That the vineyard, when properly planted and brought to perfec- 
tion, was the most valuable part of the farm, seems to have been an 
undoubted maxim in the ancient agriculture, as it is in the nmdern 
through all the wine countries. But whether it was advantageous to 
plant a new vineyard, was a matter of dispute among the ancient 
Italian husbandmen, as we learn from Columella. He decides, like a 
true lover of all curious cultivation, in favour of the vineyard, and 
endeavours to show, by a comparison of the profit and expencc, that 
it was a most advantageous improvement.’ ' Such comparisons, how- 
ever, between the profit and cxpence of new projects, are commonl> 
very fallacious; and in nothing more so than in agriculture. Ilarl the 
gain actually made by such plantations been commonly as great a-» 
he imagined it might have been, there could have been no dis[niti' 
about it. The same point is frequently at this day a matter of con- 
troversy in the wine countries. Their writers on agriculture, indeed, 
the lovers and promoters of high cultivation, seem generally di'i- 
posed to decide with Columella in favour of the vineyard. In France 
the anxiety of the proprietors of the old vineyards to prevent the 
planting of any new ones, seems to favour their opinion, and to indi- 
cate a consciousness in those who must have the e.xpericnce, that 
this species of cultivation is at present in that country more i)rotit- 
able than any other. It seems at the same lime, however, to indicate 
another opinion, that this superior profit can last no longer th:m tlie 
laws which at present restrain the free cultivation of the vine. In 
1731, they obtained ?n order of council, prohibiting both the plant- 
ing of new vineyards, and the renewal of those old ones, of which the 
cultivation had been interrupted for two years, without a jjarticular 
permission from the king, to be granted only in consequence of an 
information front the inleiidant of the province, certifying that he 
had examined the land, and that it was incapable of any other cul- 
ture. The pretence of this order was the scarcity of corn and pasture, 
and the super-abundance of wine. But had this super-abundance 
been real, it would, without any order of council, have effectually 
prevented the plantation of new vineyards, by reducing the profits 
of this species of cultivation below their natural proportion to those 
of corn and pasture. With regard to the supposed scarcity of corn 

” De re rustica, iii., 3. 


occasioned by the multiplication of vineyards, corn is nowhere in 
France more carefully cultivated than in the wine provinces, where 
the land is fit for producing it ; as in Burgundy , tluieniie, and the 
Upper Languedoc. The numerous hands emiiloyed in the one species 
of cultivation necessarily encourage the other, by affotding a ready 
market for its produce. To diminish the number of those who are 
capable of paying for it, is surely a most iinpromisini; exjiedient for 
encouraging the cultivation of corn. It is like the policy which 
would promote agriculuire by discouraging manufactures. 

The rent and profit of those productions, therefore, which require 
either a greater original expence of improvement in order to fit the 
land for them, or a greater annual cxpenco of cultivation, though 
often much superior to those of com and pasture, yet when they da 
no more than compensate such extraordinary expence, are in reality 
regulated by the rent and profit of those common crops. 

It sometimes happens, indeed, that the quantity of land which 
can be fitted for some particular produce, is loo small to supply the 
effectual demand. The whole produce can be disposed of to those 
who are willing to give somewhat more than what is sufficient to 
pay the whole rent, wages and profit necessary for raising and bring- 
ing it to market, accordin,g to their natural rates, or according to 
the rates at which they are paid in the greater part of other culti- 
vated land. The surplus part of the price which remains after de- 
fraying the whole expence of improvement and cultivation may 
commonly, in this case, and in this case only, bear no regular pro- 
portion to the like surplus in corn or pasture, but may exceed it in 
almost any degree; and the greater part of this excess naturally goes 
to the rent of the landlord. 

The usual and natural proportion, for example, between the rent 
and profit of wine and those of corn and pasture, must be under- 
stood to take place only w'ith regard to those vineyards which pro- 
duce nothing but good common wine, such as can be raised almost 
any-w'here, upon any light, gravelly, or sandy .soil, and w'hich has 
nothing to recortimeud it but its strength and wholesomeness. It is 
with such vineyards only that common land of the country can be 
brought into competition; for with those of a peculiar quality it is 
evident that it cannot. 

The vine is more affected by the difference of soils than any other 
fruit tree. From some it derives a flavour which no culture or man- 
agement can equal, it is supposed, upon any other. This flavour, 
real or imaginary, is sometimes peculiar to the produce of a few 
vineyards; sometimes it extends through the greater part of a small 
district, and sometimes through a considerable part of a large prov- 


ince. The whole quantity of such wines that is brought to market 
falls short of the effectual demand, or the demand of those who 
’would be willing to pay the whole rent, profit and wages necessary 
for preparing and bringing them thither, according to the ordinary 
rate, or according to the rate at which they are paid in common 
vineyards. The whole quantity, therefore, can be disposed of to 
those who are willing to pay more, which necessarily raises the ’ 
price above that of common wine. The difference is greater or le^s, 
according as the fashionableness and scarcity of the wine render 
the compeiition of the buyers more or less eager. Whatever it be, 
the greater part of it goes to the rent of the landlord. For though 
such vineyards are in general more carefully cultivated than nubt 
others, the high price of the wine seems to be, not so much the effect, 
as the cause of this careful cultivation. In so valuable a produce the 
loss occasioned by negligence is so great as to force even the most 
careless to attention. A small part of this high price, therefore, is 
sufficient to pay the wages of the extraordinary labour bestowed up- 
on their cultivation, and the profits of t!ie extraordinary stock which 
puts that labour into motio.n. 

The sugar colonies possessed by the European nations in tlie Wc^t 
Indies, may be compared to those precious vineyards. Their whole 
produce falls short of the effectual demand of Europe, and can be 
disposed of to those who are willing to give more than what is suf- 
ficient to pay the whole rent, profit and wages necessary for pre- 
paring and bringing it to market, according to the rate at which they 
are commonly paid by any other produce. In Cochin-china the fine.';! 
white sugar commonly sells for three piastres the quintal, about 
thirteen shillings and sixpence of our money, as we are told by Mr. 
Poivre,’'’ a very careful observer of the agriculture of that country 
What is there called the quintal weighs from a hundred and fifty in 
two hundred Paris pounds, or a hundred and seventy-five Paris 
pounds at a medium,-" which reduces the price of the hundred 
weight English tn about eight shillings sterling, not a fourth part of 
what is commonly paid for the brown or muskavada sugars im- 
ported from our colonies, and not a sixth part of vyhat is paid for the 
finest white sugar. The greater part of the cultivated lands in Co- 

“ Ed. I reads “their.” 

"VoyaRcs d’un Fhilosophe [om observations sur les mceurs et les arts des 
peuples de lAjrique, de I’Asie, et de FAmirique, 1768, pp. 92, 93. The note ap- 
pears first in ed. 2 1 . 

” The French original says the Cochin-China quintal “equivaut a 150 L. 200 
de no.s livres, poids de marc,” which cannot possibly bear the meaning as- 
cribed to it in the text. Probably the 150 L. are pounds equal to li of the 
pounds poids de marc. This would make the cwt. English worth only about 
seven shillings. 



chin-china are employed in producing corn and rice, the food of the 
great body of the people. The respective prices of corn, rice, and su- 
gar, are there probably in the natural proportion, or in that which ' 
naturally takes place in the different crops of the greater part of 
cultivated land, and which recompences the landlord and farmer, as 
nearly as can be computed, according to what is usually the original 
expence of improvement and the annual expence of cultivation. But 
in our sugar colonies the price of sugar bears no such proportion to 
that of the produce of a rice or corn field either in Europe or in 
America. It is commonly said, that a sugar planter expects that the 
rum and the molasses should defray the whole expence of his cul- 
tivation, and that his sugar should be all clear profit. If this be true, 
for I pretend not to affirm it, it is as if a corn farmer expected to de- 
fray the cxpence of his cultivation with the chaff and the straw, and 
that the grain should be all clear profit. We see frequently societies 
of merchants in London and other trading towns, purchase waste 
lands in our sugar colonies, which they expect to improve and culti- 
vate with profit by means of factors and agents: notwithstanding 
the great distance and the uncertain returns, from the defective ad- 
ministration of justice in those countries. Nobody will attempt to 
improve and cultivate in the same manner the most fertile lands of 
Scotland, Ireland, or the corn provinces of North America, though 
from the more exact administration of justice in these countries, 
more regular returns might be expected. 

In Virginia and ilaiyland the cultivation of tobacco is preferred, 
as more profitable, to that of corn. Tobacco might be cultivated with 
advantage through the greater part of Europe ; but in almost every 
part of Europe it has become a principal subject of taxation, and to 
collect a tax from every different farm in the country where this 
plant might happen to be cultivated, would be mote difficult, it has 
been supposed, than to levy one upon its importation at the custom- 
house. The cultivation of tobacco has upon this account been most 

absurdly prohibited through the greater part of Europe,-’ which 


“^Tobacco growiiiR in Enfiland, Ireland, and the Ch.inncl Ir-lamh was pro- 
hibited by 12 Car. II.. c. 34, the preamble of wl idi allcces the lords and 
commons have considered “of how great concern and importance it is 
the colonies and plantations of this kingdom in .-tmcrica be defended, main- 
tained and kept up, and that all due and possible encouragement be given 
unto them, and that not only in regard great and considerable dominions and 
countries have been thereby gained and added to the imperial crown of this 
realm, but for that the strength and welfare of this l.ingdom do very much 
depend upon them in regard of the employment of a very considerable part 
of its sl’.ipping and seamen, and of the vent of very great quimtities of its 
native commodities and manufactures as also of its supply with several con- 
siderable commodities which it was wont formerly to have only from for- 
eigners and at far dearer rates, and forasmuch as tobacco is one of the main 


necessarily gives a sort of monopoly to the countries where it is al- 
lowed; and as Virginia and Maryland produce the greatest quantity 
of it, they share largely, though with some competitors, in the ad- 
vantage of this monopoly. The cultivation of tobacco, however, 
seems not to be so advantageous as that of sugar. I have never even 
heard of any tobacco plantation that was improved and cultivated 
by the capital of merchants who resided in Great Britain, and our 
tobacco colonies send us home no such wealthy planters as we see 
frequently arrive from our sugar islands. Though from the prefer- 
ence given in those colonies to the cultivation of tobacco above that 
of corn, it would ajipeai that the effeciual demand of Europe for to- 
bacco is not completely sup[)lied, it probably is more nearly so than 
that for sugar: And though the pre.-,ent price of tobacco is [rrobably 
more than sufficient to pay the whole rent, wages and profit neces- 
sary for pre[)aring and bringing it to market, according to the rate 
at which they are commonly paid in corn land; it must not be so 
much mure as the present price of sugar. Our tolnicco planters, ac- 
cordingly, have shewn the same fear of the super-abunflance of to- 
bacco, which the pioptiettirs of the old vineyards in France have of 
the super-abundance of wine. By act of assembly they have re- 
strained its cultivation to si.x thousand [jlant.s, supposed to yield a 
thousand weight of tobacco, for every negro between si.xteen and 
sixty years ul age.-- Such a negro, over and above Ibis (juantity of 
tohaccf), can manage, they reckon, four acre.s of Indian corn.“^ To 
prevent the market Irom being overstocked too, they have soine- 
time.s, in plentiful years, we are told by Dr. Douglas,-* (I suspect 
he has been ill informed) burnt a certain f|uanlily of tobacco for 
every negro, in the same manner as the Ifutclr are said to do of 
spices.-’ If .Mirh violent meth()d.iare neces-sary to keep up the pres- 

pruduiti rjf sl-vliu1 of dm e iilanUiliiiri-. .snrl >i|)im whiih their well ,ie timi 
subu-lcnec ;ir.d the n.ivii'.iLUin ol lliii'diini .uid vtiil ol il^ i uniiimdiln > 
thither dll ipui h depend ; And in I It?, lid il is fuiiiid by evlieiieiui lh> In- 
biic(i), plniitid in ihe e p.iitT .ire rinl mi t-'iind ,inil wlnile-iiiiie fm llie t il 1 1 
thereof, nnrl hy the j/Iiinliiii’ llietenl \oiir W,ije-ty i. rlepii''ed iil ,i len 
sider.ible p.irl of your revenue.” 'Ilie prohibition w,!- eclenrled to Sioll.aiil 
by (b (I. Ill,, 1 . 71. 

'■‘VVilliiiin ljou(?lass, M.D,, .1 Summary, IlUluriial and l‘ulttital, i-/ Hi- 
Pint Phintmn, I'rrigtc'iiivr Imprnvfmenl\ and Present State of the Jiritish 
Setllemi nt\ in North Ainrrira, 17G0, vol. it., pp. 359, 360 and 373. 

p, ?7(, but the iibisi'-e i-, “jn induiliiouj man" not ‘-surh a ntirni.” 

I)rii!)?lii‘-’s Suinmnn,', vol. ii., p. 57.1, 37). Tins note appears first in ed 2. 
In the text ol ed, r, the name is s|iell “Douf'lass." 

■‘"I his savina about the Dutih and -piees Is relieatcd below, p. 401, Cioo. 
Douftlies, yul. ii., p. 372, in a note to the statement that Virginia and Alaiy- 
land oeeasionally produce more than they can sell to arlvantage, which imme- 
diately precedes hi.., account of the occa-ionul burning of tobacco, says: “This 
15 sometimes the case with the Dutch East India spices anrl the West India 


eat price of tobacco, the superior advantage of its culture over that 
of com. if it still has any. will not probably be of long continuance. 

It is in tliis manner that the rent of the cultivated land, of which 
the produce Ls human food, regulates the rent of the greater part of 
Other cultivated land, Xo particular produce can long afford less; 
because the land would irmnediately be turned to another use: And 
if any particular produce commonly affords more, it is because the 
quantity of land which can be fitted for it i» tw small to supply the 
effectual demand. 

In Europe corn is the principal produce of land which serves im- 
mediately for human food. Except in paiticular situations, there- 
fore, the rent of corn land regulates in Europe that of all other cul- 
tivated land. Btitain need en\y neither the vineyards of France nor 
the olive plantations of Italy. Except in particular situations, the 
value of these is regulated by that of corn, in which the fertility of 
Britain is not much inferior to that of either of those two countries. 

If in any country the common and fax ouiite vegetable food of the 
people should be drawn from a plant of which the most ccunmon 
land, with the same or nearly the smne culture, produced a much 
greater quantity than the fertile does of corn, the rent of the 
landlord, or the surplus quantity of foi.xl which would remain to 
him. after paying the labour and replacing the stock of the farmer 
together with its ordinary profits, would necessarily be much 
greater. Whatever was the rate at xvhixh labour was commonly 
maintained in tliat country, this greater suiplus could alway.s main- 
tain a greater quantity of it. and consequently enable the landlord 
to purchase or command a greater quantity of it. The real value of 
his rent, his real pow-er and authority, his command of the neces- 
saries and conveniencies of life with which the labour of other peo- 
ple could supply him, would necessatih' be much greater, 

rice field produces a much greater quantity of fix'd than the 
most fertile corn field. Two crops in the year from thirt.x' to .sixty 
bushels each, are said to be the ordinary produce of an acre. Though 
its cultix'ation. therefore, reipiires more labour, a much greater sur- 
plus remains after maintaining all that labour. In those rice coun- 
tries, therefore, where rice is the common and favourite vegetable 
food of the people, and where the cultivators are chiefly maintained 
with it, a greater share of this greater surplus should belong to the 
landlord than in corn countries. In Carolina, where the planters, as 
in other British colonies, are generally both farmers and landlords, 
and where rent consequently is confounded wath profit, the cultiva- 
tion of rice is found to be more profitable than that of corn, though 
their fields produce only one crop in the year, and though, from the 


prevalence of the customs of Europe, rice is not there the common 
an^ favourite vegetable food of the people. 

i^A good rice field is a bog at all seasons, and at one season a bog 
covered with water. It is unfit either for corn, or pasture, or vine- 
yard, or, indeed, for any other vegetable produce that is very useful 
1 to men: And the lands which are fit for those purposes, are not fit 
for rice. Even in the rice countries, therefore, the rent of rice lands 
' cannot regulate the rent of the other cultivated land which can 
never be turned to that produce^ 

The food produced by a field of potatoes is not inferior in quan- 
tity to that produced by a field of rice, and much superior to what is 
produced by a field of wheat. Twelve thousand weight of potatoes 
from an acre of land is not a greater produce than two thousand 
weight of wheat. The food or solid nourishment, indeed, which can 
be drawn from each of those two plants, is not altogether in pro- 
portion to their weight, on account of the watery nature of potatoes. 
Allowing, however, half the weight of this root to go to water, a 
very large allowance, such an acre of potatoes will still produce six 
thousand weight of solid nourishment, three times the quantity pro- 
duced by the acre of wheat. An acre of potatoes is cultivated with 
less cxpence than an acre of wheat; the fallow, w'hich generally pre- 
cedes the sowing of wheat, more than compensating the hoeing and 
other extraordinary culture which is always given to potatoes. 
Should this root ever become in any part of Europe, like rice in 
some rice countries, the common and favourite vegetable food of 
the people, so as to occupy the same proportion of the lands in til- 
lage which wheat and other sorts of grain for human food do at 
present, the same quantity of cultivated land would maintain a 
much greater number of people, and the labourers being generally 
fed with potatoes, a greater surplus would remain after replacing 
all the stock and maintaining all the labour employed in cultivation. 
A greater share of this surplus too would belong to the landlord. 
Population would increase, and rents would rise much beyond what 
they arc at pre.sent, ' 

The land which is fit for potatoes, is fit for almost every other 
useful vegetable. If they occupied the same proportion of culti- 
vated land which corn does at present, they would regulate, in the 
same manner, the rent of the greater part of other cultivated land. 

In some parts of Lancashire it is pretended, I have been told, that 
bread of oatmeal is a heartier food for labouring people than 
wheaten bread, and I have frequently heard the same doctrine held 
in Scotland. I am, however, somewhat doubtful of the truth of it. 
The common people in Scotland, who are fed with oatmeal, are in 



general neither so strong nor so handsome as the same rank of peo- 
ple in England, who are fed with wheaten bread. They neither work 
so well, nor look so w'ell: and as there is not the same difference be- 
tween the people of fashion in the two countries, experience would 
seem to show, that the food of the common people in Scotland is 
not so suitable to the human constitution as that of their neighbours 
of the same rank in England.^® But it seems to be otherwise with 
potatoes. The chairmen, porters, and coal-heavers in London, and 
those unfortunate women who live by prostitution, the strongest 
men and the most beautiful women perhaps in the British domin- 
ions, are said to be, the greater part of them, from the lowest rank 
of people in Ireland, who are generally fed with this root. No food 
can afford a more decisive proof of its nourishing quality, or of its 
being peculiarly suitable to the health of the human constitution. 

It is difficult to preserve potatoes through the year, and impos- 
sible to store them like corn, for two or three years together. The 
fear of not being able to sell them before they rot, discourages their 
cultivation, and is, perhaps, the chief obstacle to their ever becom- 
ing in any great country, like bread, the principal vegetable food of 
all the different ranks of the people. 

Past II 

Of the Produce of Land which sometimes does, and sometimes does 
not, afford Rent 

Hu man food seems to be the only produc e o i _ land which always 
and ne cessarily afford s some rent to the .landlord. Other sorts of 
prod uce sometim es may and sometimes may not, according to dif- 
fere qt circu mstances. 

After food, cloathing and lodging are the two great wants of man- 
kind. • 

Land in its original rude state can afford the materials of cloath- 
ing and lodging to a much greater number of people than it can feed. 
In its improved state it can sometimes feed a greater number of peo- 
ple than it can supply with those materials ; at least in the way in 
which they require them, and are willing to pay for them. In the one 
state, therefore, there is always a super-abundance of those ma- 
terials, which are frequently, upon that account, of little or no value. 
In the other there is often a scarcity, which necessarily augments 

’’ The inferiority of oatmeal has already been asserted above, pp. 7$, 76. 

i 62 the wealth of NATIONS 

their value. In the one state a great part of them is thrown away as 
useless, and the price of what is used is considered as equal only to 
the labour and expence of fitting it for use, and can, therefore, afford 
no rent to the landlord. In the other they are all made use of, and 
there is frequently a demand for more than can be had. Somebody 
is always willing to give more for every part of them than what is 
sufficient to pay the expence of bringing them to market. Their 
price, therefore, can always afford some rent to the landlord. 

The skins of the larger animals were the original materials of 
rlna Hiin g. Among nations of hunters and shepherds, therefore, 
^oie food consists chiefly in the flesh of those animals, every man, 
by providing himself with food, provides himself with the materials 
of more cloathing than he can wear. If there was no foreign com- 
merce, the greater part of them would be thrown away as things of 
no value. This was probably the case among the hunting nations of 
North America, before their country was discovered by the Euro- 
peans, with whom they now exchange their surplus peltry, for 
blankets, fire-arms, and brandy, which gives it some value. In the 
present commercial state of the known world, the most barbarous 
nations, I believe, among whom land property is established, have 
some foreign commerce of this kind, and find among their wealthier 
neighbours such a demand for all the materials of cloathing, which 
their land produces, and which can neither be wrought up nor con- 
consumed at home, as raises their price above what it costs to send 
them to those wealthier neighbours.^® It affords, therefore, some 
rent to the landlord. .When the greater part of the highland cattle 
were consumed on their own hills, the exportation of their hides 
made the most considerable article of the commerce of that coun- 
try, and what they were exchanged for afforded some addition to 
the rent of the highland estates.-® The wool of England, which in 
old times could neither be consumed nor wrought up at home, found 
a market in the then wealthier and more industrious country of 
Flanders, and its price afforded something to the rent of the iand 
which produced it. In countries not better cultivaLed than England 
was then, or than the highlands of Scotland are now, and which had 
no foreign commerce, the materials of cloathing would evidently 1 )f 
so super-abundant, that a great part of them would be throwr 
away as useless, and no part could afford any rent to the landlord. 

/Jhe materials of lodging cannot always be transported to so great 
a distance as those of cloathing, and do not so readily become an 

below^^ always ’ is qualified almost to the extent of contradiction on p. 165, 

“Ed. I reads “thither." » Above, p. 149, and below, p. 220. 



object of foreign commerce. When they are super-abundant in the 
country which produces them, it frequently happens, even in the 
present commercial state of the world, that they are of no value to ' 
the landlord. A good stone quarry in the neighbourhood of London 
would afford a considerable rent< In many parts of Scotland and 
Wales it affords nonet^Barren timber for building is of great value 
in a populous and well-cultivated country, and the land which pro- 
duces it affords a considerable rent. But in many parts of North 
America the landlord would be much obliged to any body who 
would carry away the greater part of his large trees. In some parts 
of the highlands of Scotland the bark is the only part of the wood 
which, for want of roads and water-carriage, can be sent to mar- 
ket. The timber is left to rot upon the ground. When the materials 
of lodging are so super-abundant, the part made use of is worth 
only the labour and expence of fitting it for that use. It affords no 
rent to the landlord, who generally grants the use of it to whoever 
takes the trouble of asking it. The demand of wealthier nations, 
hov/ever, sometimes enables him to get a rent for it. The paving of 
the streets of London has enabled the owners of some barren rocks 
on the coast of Scotland to draw a rent from vAat never afforded 
any before. The woods of Norway and of the coasts of the Baltic, 
find a market in many parts of Great Britain which they could not 
find at home, and thereby afford some rent to their proprietors. 

Countries are populous, not in proportion to the number of peo- 
ple whom their produce can cloath and lodge, but in proportion to 
that of those whom it can feed. When food is provided, it is easy to 
find the necessary cloathing and lodging. But though these are at 
hand, it may often be difficult to find food. In some parts even of 
the British dominions what is called A House, may be built by one 
day’s labour of one man. The simplest species of cloathing, the 
skins of animals, require somewhat more labour to dress and pre- 
pare them for use. They do not, however, require a great deal. 
Among savage and barbarous nations, a hundredth or little more 
than a hundredth part of the labour of the whole year, will be suffi- 
cient to provide them with such cloathing and lodging as satisfy 
the greater part of the people. .All the other ninety-nine parts are 
frequently no more than enough to provide them with food. 

• But when by the improvement and cultivation of land the labour 
of one family can provide food for two, the labour of half the so- 
ciety becomes sufficient to provide food for the whole. The other 
half, therefore, or at least the greater part of them, can be employed 
in providing other things, or in satisfying the other wants and fan- 
cies of mankind. Cloathing and lodging, household furniture, and 

i64 the wealth OF NATIONS 

what is called Equipage, are the principal objects of the greater part 
of those wants and fancies. The rich man consumes no more food 
'than his poor neighbour. In quality it may be very different, and to 
select and prepare it may require more labour and art; but in quan- 
tity it is very nearly the same. But compare the spacious palace and 
great wardrobe of the one, with the hovel and the few rags of the 
other, and you will be sensible that the difference between their 
cloathing, lodging, and household furniture, is almost as great in 
quantity as it is in quality., The desire of food is limited in every 
man by the narrow capacity of the human stomach ; but the desire 
• of the conveniencies and ornaments of building, dress, equipage, 
and household furniture, seems to have no limit or certain boundary. 
'Those, therefore, who have the command of more food than they 
themselves can consume, are always willing to exchange the surplus, 
or, what is the same thing, the price of it, for gratifications of this 
other kind. What is over and above satisfying the limited desire, is 
given for the amusement of those desires which cannot be satisfied, 
but seem to be altogether endless. The poor, in order to obtain food 
exert themselves to gratify those fancies of the rich, and to obtain 
it more certainly, they vie w'ith one another in the cheapness aiivl 
perfection of their work. The number of workmen increases with tlv' 
increasing quantity of food, or with the growing improvement and 
cultivation of the lands; and as the nature of their business admi'L 
of the utmost subdivisions of labour, the quantity of materia’s 
which they can work up, increases in a much greater proportion 
than their numbers. Hence arises a demand for every sort of ma- 
terial which human invention can employ, either usefully or orna- 
mentally, in building, dress, equipage, or household furniture; for 
the fossils and minerals contained in the bowels of the earth, the 
precious metals, and the precious stones. 

Food is in this manner, not only the original source of rent, but 
every other part of the produce of land which afterwards affords 
rent, derives that part of its value from the improvement of the 
powers of labour in producing food by means of the improvement 
and cultivation of land.®” 

Those other parts of the produce of land, however, which after- 
wards afford rent, do not afford it always. Even in improved and 
cultivated countries, the demand for them is not always such as to 
afford a greater price than what is sufficient to pay the labour, and 
replace, together with its ordinary profits, the stock which must be 

. This and the two precechng paragraphs appear to be based on the disser- 
tation on the natural wants of mankind in Lectures, pp. 137-161: cp. Morat 
Sentimenti, i7S9,p.349. , e 

employed in bringing them to market. Whether It is or is not such, 
depends upon different circumstances. 

Whether a coal-mine, for example, can afford any rent, depends • 
partly upon its fertility, and partly upon its situation. 

A mine of any kind may be said to be either fertile or barren, ac- 
cording as the quantity of mineral which can be brought from it 
by a certain quantity of labour, is greater or less than what can be 
brought by an equal quantity from the greater part of other mines 
of the same kind. 

Some coal-mines advantageously situated, cannot be wrought on 
account of their barrenness. The produce does not pay the expence. 
They can afford neither profit nor rent. 

There are some of which the produce is barely sufficient to pay 
the Iabour,“^ and replace, together with its ordinary profits, the 
stock employed in working them. They afford some profit to the 
undertaker of the work, but no rent to the landlord. They can be 
wrought advantageously by nobody but the landlord, who being 
himself undertaker of the work, gets the ordinary profit of the 
capital which he employs in it. JIany coal-mines in Scotland are 
wrought in this manner, and can be wrought in no other. The land- 
lord will allow nobody else to work them without paying some rent, 
and nobody can afford to pay any. 

Other coal-mines in the same country sufficiently fertile, cannot 
be wrought on account of their situation. A quantity of mineral suf- 
ficient to defray the expence of working, could be brought from the 
mine by the ordinary, or even less than the ordinary quantity of 
labour: But in an inland country, thinly inhabited, and without 
either good roads or water-carriage, this quantity could not be sold. 

Coals are a less agreeable few'el than wood: they are said too to 
be less wholesome. The expence of coals, therefore, at the place 
where they are consumed, must generally be somewhat less than 
that of wood. 

The price of wood again varies with the state of agriculture, 
nearly in the same manner, and exactly for the same reason, as the 
price of cattle. In its rude beginnings the greater part of every 
country is covered with wood, which is then a mere incumbrance of 
no value to the landlord, who would glady give it to any body for 
the cutting. As agriculture advances, the woods are partly cleared 
by the progress of tillage, and partly go to decay in consequence of 
the increased number of cattle. These, though they do not increase 
in the same proportion as corn, which is altogether the acquisition 
of human industry, yet multiply under the care and protection of 

“ Misprinted “labourer” in ed. $. 


men ; who store up in the season of plenty what may maintain them 
in that of scarcity, who through the whole year furnish them with 
■ a greater quantity of food than uncultivated nature provides for 
them, and who by destroying and extirpating their enemies, secure 
them in the free enjoyment of all that she provides. Numerous 
herds of cattle, when allowed to wander through the woods, though 
they do not destroy the old trees, hinder any young ones from com- 
ing up, so that in the course of a century or two the whole forest 
goes to ruin. The scarcity of wood then raises its price. It affords a 
good rent, and the landlord sometimes finds that he can scarce em- 
ploy his best lands more advantageously than in growing barren 
timber, of which the greatness of the profit often compensates the 
lateness of the returns. This seems in the present times to be nearly 
the state of things in several parts of Great Britain, where the profit 
of plan t ing is found to be equal to that of either corn or pasture. 
The advantage which the landlord derives from planting, can no- 
where exceed, at least for any considerable time, the rent which 
these could afford him; and in an inland country which is highly 
cultivated, it will frequently not fall much short of this rent. Upon 
the sea-coast of a well-improved country, indeed, if coals can con- 
veniently be had for fewel,*’^ it may sometimes be cheaper to bring 
barren timber for building from less cultivated foreign countries, 
than to raise it at home. In the new town of Edinburgh, built with- 
in these few years,®® there is not, perhaps, a single stick of Scotch 

Whatever may be the price of wood, if that of coals is such that 
the expence of a coal-fire is nearly equal to that of a wood one, we 
may be assured, that at that place, and in these circumstances, the 
price of coals is as high as it can be. It seems to be so in some of 
the inland parts of England, particularly in Oxfordshire, where it 
is usual, even in the fires of the common people, to mLx coals and 
wood together, and where the difference in the expence of those 
two sorts of fewel cannot, therefore, be very great. 

Coals, in the coal countries, are every-where match below this 
highest price. If they were not, they could not bear the expence of 
a distant carriage, either by land or by water. A small quantity 
only could be sold, and the coal masters and coal proprietors find it 
more for their interest to sell a great quantity at a price somewhat 

" Ed. I reads “if it can conveniently get coals for fewel.” 

“The North Bridge was only made passable in 1772: in 1778 the buildings 
along Princes Street had run to a considerable length, and St. Andrew’s Square 
and the streets connected with it were almost complete. A plan of that date 
shows the whole block between Queen Street and Princes Street (Amot, His- 
tory 0} Edinburgh, 1779, pp. 233, 315, 318, 319). 


above the lowest, than a small quantity at the hignest. The most 
fertile coal-mine too, regulates the price of coals at all the other 
mines in its neighbourhood Both the proprietor and the under- 
taker of the work find, the one that he can get a greater rent, the 
other that he can get a greater profit, by somewhat underselling all 
their neighbours. Their neighbours are soon obliged to sell at the 
same price, though they cannot so well afford it, and though it al- 
ways diminishes, and sometimes takes away altogether both their 
rent and their profit. Some works are abandoned altogether; others 
can afford no rent, and can be wrought only by the proprietor. 

The lowest price at which coals can be sold for any considerable 
time, is, like that of all other commodities, the price which is 
barely sufficient to replace, together with its ordinary profits, the 
stock which must be employed in bringing them to market. At a 
coal-mine for which the landlord can get no rent, but which he 
must either work himself or let it alone altogether, the price of 
coals must generally be nearly about this price. 

Rent, even where coals afford one, has generally a smaller share 
in their price than in that of most other parts of the rude produce 
of land. The rent of an estate above ground, commonly amounts to 
what is supposed to be a third of the gross produce; and it is gen- 
erally a rent certain and independent of the occasional variations 
in the crop. In coal-mines a fifth of the gross produce is a very 
great rent; a tenth the common rent, and it is seldom a rent certain, 
but depends upon the occasional variations in the produce. These 
are so great, that in a country where thirty years purchase is con- 
sidered as a moderate price for the property for a landed estate, ten 
years purchase is regarded as a good price for that of a coal-mine. 

The value of a coal-mine to the proprietor frequently depends ®’’ 
as much upon its situation as upon its fertility. That of a metallic 
mine depends more upon its fertility, and less upon its situation. 
The coarse, and still more the precious metals, when separated from 
the ore, are so valuable that they can generally bear the expence of 
a very long lahd, and of the most distant sea carriage. Their market 
is not confined to the countries in the neighbourhood of the mine, 
but extends to the whole world. The copper of Japan makes an ar- 
ticle of commerce in Europe ; the iron of Spain in that of Chili and 

“Buchanan (ed. of Wealth of Nations, vol. i., p. 279), commenting on this 
passage, remarks judiciously: “It is not by the produce of one coal mine, 
however fertile, but by the joint produce of all the coal mines that can be 
worked, that the price of coals is fixed. A certain quantity of coals only can 
be consumed at a certain price. If the mines that can be worked produce 
more than this quantity the price will fall; if they produce less it will rise." 

“ Ed. I reads “depends frequently.” 

” Ed. I reads “articlo in the commerce of Europe.” 

168 the wealth of NATIONS 


Peru. The silver of Peru finds its way, not only to Europe, but from 
Europe to China. 

‘ The price of coals in Westmorland or Shropshire can have little 
effect on their price at Newcastle; and their price in the Lionnois 
can have none at all. The productions of such distant coal-mines can 
never be brought into competition with one another. But the pro- 
ductions of the most distant metallic mines frequently may, and in 
fact commonly are. The price, therefore, of the coarse, and still 
more that of the precious metals, at the most fertile mines in the 
world, must necessarily more or less affect their price at every other 
in it. The price of copper in Japan must have some influence 
upon its price at the copper mines in Europe. The price of silver in 
Peru, or the quantity either of labour or of other goods which it 
will purchase there, must have some influence on its price, not only 
at the silver mines of Europe, but at those of China. After the dis- 
covery of the mines of Peru, the silver mines of Europe were, the 
greater part of them, abandoned.^he value of silver was so much 
reduced that their produce could no longer pay the expence of work- 
ing them, or replace, with a profit, the food, deaths, lodging and 
other necessaries which were consumed in that operation. This was 
the case too with the mines of Cuba and St. Domingo, and even 
with the ancient mines of Peru, after the discovery of those of 

The price of every metal at every mine, therefore, being regu- 
lated in some measure by its price at the most fertile mine in the 
world that is actually wrought, it can at the greater part of mines 
do very little more than pay the expence of working, and can sel- 
dom afford a very high rent to the landlord. Rent, accordingly, 
seems at the greater part of mines to have but a small share in the 
price of the coarse, and a still smaller in that of the precious met- 
als. Labour and profit make up the greater part of both. 

A sixth part of the gross produced may be reckoned the average 
rent of the tin mines of Cornwall, the most fertile that are known 
in the world, as we are told by the Rev. Mr. Borlace, vice-warden 
of the stannaries. Some, he says, afford more, and some do not af- 
ford so much.^^ A sixth part of the gross produce is the rent too of 
several very fertile lead mines in Scotland. 

In the silver mines of Peru, we are told by Frezier and Ulloa, the 
proprietor frequently exacts no other acknowledgment from the un- 
dertaker of the mine, but that he will grind the ore at his mill, pay- 

” Natural History of Cornwall, by WUUam Borlase, 
mg IS there said as to the landlord somctlixies receiving 

1758) p. 175, but noth- 
more than oiiC'-8uth» 


ing him the ordinary multure or price of grinding.®’ Till 1736, in- 
deed, the tax of the king of Spain amounted to one-fifth of the 
standard silver, which till then might be considered as the real rent 
of the greater part of the silver mines of Peru, the richest which 
have been known in the world. If there had been no tax. this fifth 
would naturally have belonged to the landlord, and many mines 
might have been wrought which could not then be wrought, be- 
cause they could not afford this tax.®® The tax of the duke of Corn- 
wall upon tin is supposed to amount to more than five per cent, or 
one-twentieth part of the value: and whatever may be his pro- 
portion, it would naturally too belong to the proprietor of the mine, 
if tin was duty free. But if you add one-twentieth to one-sixth, you 
will find that the whole average rent of the tin mines of Cornwall, 
was to the whole average rent of the silver mines of Peru, as thir- 
teen to twelve. But the silver mines of Peru are not now able to pay 
even this low rent, and the tax upon silver was, in 1736, reduced 
from one-fifth to one-tenth.'*® Even this tax upon silver too gives 
more temptation to smuggling than the tax of one-twentieth upon 
tin; and smuggling must be much easier in the precious than in 
the bulky commodity. The tax of the king of Spain accordingly is 
said to be very ill paid, and that of the duke of Cornwall very well. 
Rent, therefore, it is probable, makes a greater part of the price of 
tin at the most fertile tin mines, than it does of silver at the most 
fertile silver mines in the world. After replacing the stock em- 
ployed in working those different mines, together with its ordinary 
profits, the residue which remains to the proprietor, is greater it 
seems in the coarse, than in the precious metal. 

Neither are the profits of the undertakers of silver mines coni- 

‘'Those who are willing to labour themselves easilj' obtain of the miner a 
vein to work on ; what they get out of it is their own, paying him the King’s 
duty and the hire of the mill, which is so considerable that some are satisfied 
with the profit it yields without employing any to work for them in the 
mines.” — Frezier, Voyage to the South Sea atid along the Coasts of Chili and 
Peru in the Years 1712, 1713 and 1714, ivith a Postscript by Dr. Edmund Hal- 
ley, 1717, p. 10%. For Ulloa sec below, p. lyi, note. 

““ In place of these two sentences ed. i reads, “The tax of the King of Spain, 
indeed, amounts to one-fifth of the standard .silver, which may be considered 
as the real rent of the greater part of the silver mines of Peru, the richest 
which are known in the world. If there was no tax, this fifth would naturally 
belong to the landlord, and many mines might be wrought which cannot be 
wrought at present, because they cannot afford this tax.” 

The sum of more than fio,ooo paid on £190,954 worth of produce is men- 
tioned by Borlase. The duty was 4s. per cwt. — Natural History of Cornwall, 
P. 183. 

“ Ed. I reads “is.” 

"The reduction is mentioned again below, pp. 202, 214. Ed. i does not 
contain this sentence, and begins the next with “The high tax upon silver, too, 
gives much greater temptation to smuggling than the low tax upon tin.’’ 

170 the wealth of NATIONS 

monly very great in Peru. The same most respectable and well in- 
formed authors acquaint us, that when any person undertakes to 
work a new mine in Peru, he is universally looked upon as a man 
destined to bankruptcy and ruin, and is upon that account shunned 
and avoided by every body.^® Mining, it seems, is considered there 
in the same light as here, as a lottery, in which the prizes do not 
compensate the blanks, though the greatness of some tempts many 
adventurers to throw away their fortunes in such unprosperous 

As the sovereign, however, derives a considerable part of his rev- 
enue from the produce of silver mines, the law in Peru gives every 
possible encouragement to the discovery and working of new ones. 
Whoever discovers a new mine, is entitled to measure off two hun- 
dred and forty-six feet in length, according to what he supposes to 
be the direction of the vein, and half as much in breadth.^* He be- 
comes proprietor of this portion of the mine, and can work it with- 
out paying any acknowledgment to the landlord. The interest of 
the duke of Cornwall has given occasion to a regulation nearly of 
the same kind in that ancient dutchy. In waste and uninclosed lands 
any person who discovers a tin mine, may mark out its limits to a 
certain extent, which is called bounding a mine. The bounder be- 
comes the real proprietor of the mine, and may either work it him- 
self, or give it in lease to another, without the consent of the owner 
of the land, to whom, however, a very small acknowledgment must 
be paid upon working it.'*® In both regulations the sacred rights of 
private property are sacrificed to the supposed interests of public 

The same encouragement is given in Peru to the discovery and 
working of new gold mines; and in gold the king’s tax amounts only 
to a twentieth part of the standard metal. It was once a fifth, and 
afterwards a tenth, as in silver; but it was found that the work 
could not bear even the lowest of these two taxes.*® If it is rare, how- 

“ “Quand un hommc temoigne avoir dessein de fouillcr dans quelquc mine, 
les autres le regardant comma un extravagant qui court a sa pcfte, ct qui risque 
une ruine certaine pour des esperances eloignies et Us tSchent 
de le detoumer de son desscin, et s’ils n’y peuvent reussir, ils le fuycnt en I’evi- 
tot, comma s’ils craignaicnt qu’il ne leur communiquat son mal.” — Voyage 
historigue de I’Amerique meridionale par don George Juan et par don An- 
toine de VUoa, 1752, tom. i., p. 379. The statement relates to the province of 
Quito, and the condition of things is contrasted with that prevailing in Peru 
proper. For Frezier see next page, note 47. 

“Frezier, Voyage, p. 109. 

111. ^ History 0} Cornwall, pp. 167, 175. If the land was 

hounded (bounding could only take place on “wastrel or common’’) the 
lord of the soil received only a fifteenth. 

Ed. I reads “It was once a fifth, as in silver, but it was found the work 
could not bear it.” 

ever, bay the same authors, Frezier and Ulloa, to find a person who 
has made his fortune by a silver, it is still much rarer to find one 
who has done so by a gold mine."*^ This twentieth part seems to bfe 
the whole rent which is paid by the greater part of the gold mines 
in Chili and Peru. Gold too is much more liable to be smuggled than 
even silver; not only on account of the superior value of the metal 
in proportion to its bulk, but on account of the peculiar way in 
which nature produces it. Silver is very seldom found virgin, but, 
like most other metals, is generally mineralized with some other 
body, from which it is impossible to separate it in such quantities 
as will pay for the e.xpence, but by a very laborious and tedious 
operation, which cannot well be carried on but in workhouses 
erected for the purpose, and therefore exposed to the inspection of 
the king’s officers. Gold, on the contrary, is almost always found 
virgin. It is sometimes found in pieces of some bulk; and even when 
mixed in small and almost insensible particles with sand, earth, and 
other extraneous bodies, it can be separated from them by a very 
short and simple operation, which can be carried on in any private 
house by any body who is possessed of a small quantity of mercury. 
If the king’s tax, therefore, is but ill paid upon silver, it is likely to 
be much worse paid upon gold; and rent must make a much smaller 
part of the price of gold, than even of that of silver. 

The lowest price at which the precious metals can be sold, or the 
smallest quantitj' of other goods for which they can be exchanged 
during any considerable time, is regulated by the same principles 
which fix the lowest ordinary price of all other goods. The stock 
which must commonly be employed, the food, cloaths, and lodging 
which must corani.'niy be consumed in bringing them from the mine 
to the market, determine it. It must at least be sufficient to replace 
that stock, with the ordinary profits. 

Their hiuhest price, however, seems not to be necessarily deter- 
mined by any thing but the actual scarcity or plenty of those metals 
themselves. It is not determined by that of any other commodity, 
in the same mtinner as the price of coals is by that of wood, beyond 
which no scarcity can ever raise it. Increase the scarcity of gold to a 

" ’Tt is more rare to sec a gold miner rich than a silver miner or of any 
other metal.” — Frezier, Voyage, p. io8. There seems nothing in either Frezier 
or Uilo.T to indicate that they took the gloomy view of the prospects of the 
gold and silver miner which is ascribed to them in the text. From this and the 
curious way in which they are coupled together, here and above (pp. i68, 
169), and .al'O the fact that no mention is made of the title of either of their 
books, it seems probable that Smith is quoting from memory or from notes 
which had become mixed. It is po^ible that he confused Frezier with Ulloa’s 
collaborator, Don George Juan, but Ulloa is quoted without Frezier above, 
p. 148, and below, p. 186. 

172 th:^ wealth of nations 

certain degree, and the smallest bit of it may become more precious 
than a diamond, and exchange for a greater quantity of other g'^ods. 

The demand for those metals arises partly from their utility, and 
partly from their beauty. If you except iron, they are more useful 
than, perhaps, any other metal. As they are less liable to rust and 
impurity, they can more easily be kept clean ; and the utensils either 
of the table or the kitchen are often upon that account more agree- 
able when made of them. A silver boiler is more cleanly that a lead, 
copper, or tin one ; and the same quality would render a gold boiler 
still better than a silver one. Their principal merit, however, arises 
from their beauty, w’hich renders them peculiarly fit for the orna- 
ments of dress and furniture. No paint or dye can give so splendid 
a colour as gilding. The merit of their beauty is greatly enhanced by 
their scarcity. With the greater part of rich people, the chief enjoy- 
ment of riches consists in the parade of riches, which in their eye is 
never so complete as when they appear to possess those decisive 
marks of opulence which nobody can possess but themselves. In 
their eyes the merit of an object which is in any degree either useful 
or beautiful, is greatly enhanced by its scarcity, or by the great la- 
bour which it requires to collect any considerable quantity of it, a 
labour which nobody can afford to pay but themselves. Such objects 
they are willing to purchase at a higher price than things much 
more beautiful and useful, but more common. These qualities of 
utility, beauty, and scarcity, are the original foundation of the high 
price of those metals, or of the great quantity of other goods for 
W’hich they can every-where be exchanged. This value was anteced- 
ent to and independent of their being employed as coin, and was the 
quality which fitted them for that employment. That employment, 
however, by occasioning a new demand, and by diminishing the 
quantity which could be employed in any other way, may have 
afterwards contributed to keep up or increase their value. 

The demand for the precious stones arises altogether from their 
beauty. They are of no use, but as ornaments; and the merit of 
their beauty is greatly enhanced by their scarcity, Or by the diffi- 
culty and expence of getting them from the mine. Wages and profit 
accordingly make up, upon most occasions, almost the whole of their 
high price. Rent comes in but for a very small share; frequently for 
no share; and the most fertile mines only afford any considerable 
rent. V\ hen Tavernier, a jeweller, visited the diamond mines of Gol- 
conda and Visiapour, he was informed that the sovereign of the 
country, for whose benefit they were wrought, had ordered all of 
them to be shut up, except those which yielded the largest and finest 



stones.’*'' The others, it seems, were to the proprietor not worth the 

^s the price both of the precious metals and of the precious 
stones is regulated all over the world by their price at the most 
fertile mine in it,jthe rent which a mine of either can afford to its 
proprietor is in proportion, not to its absolute, but to what may be 
called its relative fertility, or to its superiority over other mines of 
the same kind. If new mines were discovered as much superior to 
those of Potosi as they were sujjerior to those of Europe, the value 
of silver might be so much degraded as to render even the mines of 
Potosi not worth the working. Before the discovery of the Spanish 
West Indies, the most fertile mines in Europe may have afforded as 
great a rent to their proprietor as the richest mines in Peru do at 
present. Though the quantity of silver was much less, it might have 
e.xchanged for an equal quantity of other goods, and the proprie- 
tor’s share might have enabled him to purchase or command an 
equal quantity either of labour or of commodities. The value both 
of the produce and of the rent, the real revenue which they afforded 
30 th to the public and to the proprietor, might have been the same. 

The most abundant mines either of the precious metals or of the 
precious stones could add little to the wealth of the world. produce 
of which the value is principally derived from its scarcity, is neces- 
sarily degraded by its abundance. A service of plate, and the other 
frivolous ornaments of and furniture, could be purchased for 
a smaller quantity of labour, or for a smaller quantity of commodi- 
ties ; and in this would consist the sole advantage which the world 
could derive from that abundance. 

It is otherwise in estates above ground. The value both of their 
produce and of their rent is in proportion to their absolute, and not 
to their relative fertility. The land which produces a certain quan- 
tity of food, deaths, and lodging, can always feed, cloath, and 
lodge a certain number of people; and vrhatever may be the pro- 
portion of the landlord, it will always give him a proportionable 
command of the labour of those people, and of the commodities 
with which that labour can supply him. The value of the most bar- 

" The Six Voyages of John Baplista Tavernier, a noble man of France now 
living, thro 7 tgh Turkey into Persia and the East Indies, translated by J. P., 
1678, does not appear to contain any such statement. Possibly it is merely 
founded on Tavernier’s remark that “there was a mine discovered between 
Coulour and Raolconda, which the King caused to be shut up again by reason 
of some cheats that were used there; for they found therein that sort of stones 
which had this green outside, fair and transparent, and which appeared more 
fair than the others, but when they came to the mill they crumbled to pieces'^ 
(pt. ii., p. 138). In eds. 4 and 5 “yielded” is misprinted “yield.” 



ren lands is not diminished by the neighbourhood of the most fer- 
tile. On the contrary, it is generally increased by it. The great 
number of people maintained by the fertile lands affords a marl^t 
to many parts of the produce of the barren, which they could 
never have found among those whom their own produce could 

^Vhatever increases the fertility of land in producing food, in- 
creases not only the value of the lands upon which the improvement 
is bestowed, but contributes likewise to increase that of many other 
lands, by creating a new demand for their produce. That abun- 
dance of food, of which, in consequence of the improvement of 
land, many people have the disposal beyond what they themselves 
can consume, is the great cause of the demand both for the 
precious metals and the precious stones, as well as for every other 
conveniency and ornament of dress, lodging, household furniture, 
and equipage. Food not only constitutes the principal part of the 
riches of the world, but it is the abundance of food which gives the 
principal part of their value to many other sorts of richesT^The 
poor inhabitants of Cuba and St. Domingo, when they were fiist 
discovered by the Spaniards, used to wear little bits of gold as or- 
naments in their hair and other parts of their dress. They seemed 
to value them as we would do any little pebbles of somewhat more 
than ordinary beauty, and to consider them as just worth the pick- 
ing up, but not worth the refusing to any body who asked them. 
They gave them to their new guests at the first request, without 
seeming to think that they had made them any very valuable pre.— 
ent. They were astonished to observe the rage of the Spaniards to 
obtain them; and had no notion that there could anywhere be a 
country in which many people had the disposal of so great a super- 
fluity of food, so scanty always among themselves, that for a very 
small quantity of those glittering baubles they would willingly 
give as much as might maintain a whole family for many years. 
Could they have been made to understand this, the passion of the 
Spaniards would not have surprised them. • 

Past III 

0} the Variations in the Proportion between the respective Values 
of that Sort of Produce which always affords Rent, and of that 
which sometimes docs and sometimes does not afford Rent 

The increasing abuiidance of food, in consequence of increasing im- 
provement and cultivation, must necessarily increase the demand 


for every part of the produce of land which is not food, and which 
can be applied either to use or to ornament. In the whole progress 
djf improvement, it might therefore be expected, there should be 
only one variation in the comparative values of those two different 
sorts of produce. The value of that sort which sometimes does and 
sometimes does not afford rent, should constantly rise in proportion 
to that which always affords some rent. As art and industry ad- 
vance, the materials of cloathing and lodging, the useful fossils and 
minerals of the earth, the precious metals and the precious stones 
should gradually come to be more and more in demand, should 
gradually exchange for a greater and a greater quantity of food, or 
in other words, should gradually become dearer and dearer. This 
accordingly has been the case with most of these things upon most 
occasions, and would have been the case with all of them upon all 
occasions, if particular accidents had not upon some occasions in- 
creased the supply of some of them in a still greater proportion than 
the demand. 

The value of a free-stone quarry, for example, will necessarily in- 
crease with the increasing improvement and population of the coun- 
try round about it; especially if it should be the only one in the 
neighbourhood. But the value of a silver mine, even though there 
should not be another within a thousand miles of it, will not neces- 
sarily increase with the improvement of the country in which it is 
situated. The market for the produce of a free-stone quarry can sel- 
dom extend more than a few miles round about it, and the demand 
must generally be in proportion to the improvement and popula- 
tion of that small district. But the market for the produce of a silver 
mine may extend over the whole known world. Unless the world in 
general, therefore, be advancing in improvement and population, 
the demand for silver might not be at all increased by the improve- 
ment even of a large country in the neighbourhood of the mine. 
Even though the world in general were improving, yet, if, in the 
course of its improvement, new mines should be discovered, much 
more fertile th;m any which had been known before, though the de- 
mand for silver would necessarily increase, yet the supply might in- 
crease in so much a greater proportion, that the real price of that 
metal might gradually fall; that is, any given quantity, a pound 
weight of it, for example, might gradually purchase or command a 
smaller and a smaller quantity of labour, or exchange for a smaller 
and a smaller quantity of corn, the principal part of the subsistence 
of the labourer. 

The great market for silver is the commercial and civilized part 
of the world. 

176 the wealth of NATIONS 

fll by the general progress of improvement the demand of this 
market should increase, while at the same time the supply did not 
increase in the same proportion, the value of silver would gradually 
rise in proportion to that of corny Any given quantity of silver 
would exchange for a greater and a greater quantity of corn; or, in 
other words, the average money price of corn would gradually be- 
come cheaper and cheaper. 

If, on the contrary, the supply by some accident should increase 
for many years together in a greater proportion than the demand, 
that metal woulo gradually become cheaper and cheaper; or, in 
other words, the average moneys price of corn would, in spite of all 
improvements, gradually become dearer and dearer. 

But if. on the other hand, the supply of the metal should increase 
nearly in the same proportion as the demand, it would continue to 
purchase or exchange for nearly the same quantity of corn, and the 
average money price of corn would, in spite of all improvements, 
continue very nearly the same. 

These three seem to exhaust all the possible combinations of 
events which can happen in the progress of improvement; and dur- 
ing the course of the four centuries preceding the present, if we may 
judge by what has happened both in France and Great Britain, each 
of those three different combinations seem to have taken place 
in the European market, and nearly in the same order too in which 
I have here set them down. 

Digression concerning the Variations in the Value oj Silver during 
the Course of the Four last Centuries 

First Period 

In i.lso. and for some time before, the average price of the quarter 
of wheat in England seems not to have been estimated lower than 
four ounces of silver. Tower-weight, equal to about twenty shillings 
of our present money. From this price it seems to have fallen gradu- 
ally to two ounces of silver, equal to about ten shillings of our pres- 
ent money, the price at which we find it estimated in the beginning 
of the sixteenth century, and at which it seems to have continued to 
be estimated till about 1570.®" 

i 35 °j being the 25th of Edward III, was enacted what is 
"Ed. I reads “seems.” 

The evidence for this statement, which docs not aprec with the figures in 
the tabic at the end of the chapter, is given in the next eleven paragraphs. 


called, The statute of labourers.’’^ In the preamble it complains 
much of the insolence of servants, who endeavoured to raise their 
wages upon their masters.’’" It therefore ordains, that all servants 
and labourers should for the future be contented with the same 
wages and liveries (liveries in those times signified, not only cloaths, 
but provisions) which they had been accustomed to receive in the 
2 oth year of the king, and the four preceding years; that upon 
this account their livery wheat should no-where be estimated higher 
than ten-pence a bushel, and that it should always be in the option 
of the master to deliver them either the wheat or the money. Ten- 
pence a bushel, therefore, had, in the 2 sth of Edward III, been 
reckoned a very moderate price of wheat, since it required a par- 
ticular statute to oblige servants to accept of it in exchange for their 
usual livery of provisions; and it had been reckoned a reasonable 
price ten years before that, or in the i6th year of the king, the term 
to which the statute refers. But in the i6th year of Edward III, 
ten-pence contained about half an ounce of silver, Tower-weight, 
and was nearly equal to half a crown of our present money .^■* Four 
ounces of silver, Tower-weight, therefore, equal to six shillings and 
eight-pence of the money of those times, and to near twenty shill- 
ings of that of the piesent, must have been reckoned a moderate 
price for the quaitei of eight bushels. 

This statute is surely a better evidence of what was reckoned in 
those times a moderate price of grain, than the prices of some par- 
ticular years which have generally been recorded by historians and 
other writers on account of their extraordinary dearness or cheap- 
ness, and fiom vihich, therefore, it is difficult to form any judgment 
concerning what may have been the ordinary price.’’’ There are, be- 
sides, other reasons for believing, that in the beginning of the four- 

Already quoted above, p 130. 

It speaki ol t'le \tt ol 1 349, which ordered a continuance of wages at the 
level of •’0 Edw ircl III , and fne or si\ years before {i'547 or 1348 to 1353), 
as having been pas-.d againit the malice of servants which were idle and not 
willing to serve altii the pc-tilence without taking evcessive wages,” and 
gives as the led'on loi iinv provi-ions “forasmuch as it is given the King to 
understand in this presint Parliiment bv the petition ol the commonalty that 
the said serv ants hav ,ng no itgard to the said oidinance. but to their ease and 
smgulai covLtise, do withdiaw themselves to serve gieat men and other, 
unless they have liverv and wages to the double or treble of that they were 
wont to take the said twentieth year and before, to the great damage of the 
great men and impoverishing of all the said commonalty, whereof the said 
commonaltv prayeth remedy " 

'“/e , four yeais before the twentieth year. 

This and the othei reductions of ancient money to the eighteenth century 
standard arc probably founded on the table in Martin Folkes, Table of Eng- 
lish Silver Coins, 1743, p 142 

’Eg, Fleetwood’s prices in the table at the end of the chapter 

178 the wealth of NATIONS 

teenth century, and for some time before, the common price of 
wheat was not less than four ounces of silver the quarter, and that 
of other grain in proportion. 

In 1309, Ralph de Born, prior of St. Augustine’s, Canterbury, 
gave a feast upon his installation-day, of which William Thorn has 
preserved, not only the bill of fare, but the prices of many particu- 
lars. In that feast were consumed, ist. Fifty-three quarters of wheat, 
which cost nineteen pounds, or seven shillings and two-pence a 
quarter, equal to about one-and-twenty shillings and six-pence of 
our present money; zdly. Fifty-eight quarters of malt, which cost 
seventeen pounds ten shillings, or six shillings a quarter, equal to 
about eighteen shillings of our present money: 3dly, Twenty 
quarters of oats, which cost four pounds, or four shillings a quarter, 
equal to about twelve shillings of our present money.’’® The prices of 
malt and oats seem here to be higher than their ordinary proportion 
to the price of wheat. 

These prices are not recorded on account of their extraordinary 
dearness or cheapness, but are mentioned accidentally as the prices 
actually paid for large quantities of grain consumed at a feast 
which was famous for its magnificence. 

In 1262, being the sist of Henry III, was revived an ancient 
statute called, The Assize oj Bread and Ale^'"' which, the king says 
in the preamble, had been made in the times of his progenitors 
sometime kings of England. It is probably, therefore, as old at 
least as the time of his grandfather Henry II, and may have been 
as old as the conquest. It regulates the price of bread according as 
the prices of wheat may happen to be, from one shilling to twenty 
shillings the quarter of the money of those times. But statutes of 
this kind are generally presumed to provide with equal care for all 
deviations from the middle price, for those below it as well as those 
above it. Ten shillings, therefore, containing six ounces of silver. 
Tower-weight, and equal to about thirty shillings of our present 
money, must, upon this supposition, have been reckoned the mid- 
dle price of the quarter of wheat when this statute, was first en- 
acted, and must have continued to be so in the 51st of Henry III. 
We cannot therefore be very wrong in supposing that the middle 
price was not less than one-third of the highest price at which this 

“Fleetwood, Chronicon Preciosum, 1707, pp. 83-83. 

"The date 1263 is wrong, as 31 Hen. III. ran from October 28, 1266, to 
October 27, 1267. But the editions of the statutes which ascribe the statute 
to SI Hen. III. appear to have no good authority for doing so; sec Statutes 
of the Realm, vol. i., p. 199, notes. The statute has already been quoted above, 
p. 26, and is quoted again below, p. 183. 

“ Ed. I reads “very far wrong.” 




Statute regulates the price of bread, or than six shillings and eight- 
pence of the money of those times, containing four ounces of sil- 
ver, Tower-weight. 

From these different facts, therefore, we seem to have some rea- 
son to conclude, that about the middle of the fourteenth century, 
and for a considerable time before, the average or ordinary price 
of the quarter of wheat was not supposed to be less than four 
ounces of silver. Tower-weight. 

From about the middle of the fourteenth to the beginning of the 
sixteenth century, what was reckoned the reasonable and moder- 
ate, that is the ordinary or average price of wheat, seems to have 
sunk gradually to about one-half of this price; so as at last to have 
fallen to about two ounces of silver. Tower-weight, equal to about 
ten shillings of our present money. It continued to be estimated at 
this price till about 1570. 

In the houshold book of Henry, the fifth earl of Northumber- 
land, drawn up in 1512, there are two different estimations of 
wheat. In one of them it is computed at six shillings and eight- 
pence the quarter, in the other at five shillings and eight-pence 
only.''" In 1512, six shillings and eight-pence contained only two 
ounces of silver. Tower-weight, and were equal to about ten shill- 
ings of our present money. 

From the 25th of Edward III, to the beginning of the reign of 
Elizabeth, during the space of more than two hundred years, six 
shillings and eight-pence, it appears from several different statutes, 
had continued to be considered as what is called the moderate and 
reasonable, that is the ordinary or average price of wheat. The 
quantity of silver, however, contained in that nominal sum was, 
during the course of this period, continually diminishing, in con- 
sequence of some alterations which, were made in the coin. But the 
increase of the value of silver had, it seems, so far compensated the 
diminution of the quantity of it contained in the same nominal 
sum, that the legislature did not think it worth while to attend to 
this circumstaflce. 

Thus in 1436 it was enacted, that wheat might be exported with- 
out a licence when the price was so low as six shillings and eight- 
pence:®" And in 1463 it was enacted, that no wheat should be im- 

“ The Regulations and Establishment of the Household of Henry Algernon 
Percy, the fifth Earl of Northumberland, at his castles of Wresill and Lekin- 
field in Yorkshire, begun anno domini MDXII., 1770, pp. 2, 4, but there are 
not really two estimations. It seems clear that “vs. viijd.” on p. 4 is merely a 
misprint or mistake for “vis. viijd.,” since 118 qrs. 2 bushels arc reckoned at 
fSO 8s. 4d. 

“ IS Hen. VI., c. 2. 


ported if the price was not above six shillings and eight-pence the 
quarter The legislature had imagined, that virhen the price was 
so low, there could be no inconveniency in exportation, but that 
when it rose higher, it became prudent to allow of importation. Six 
shillings and eight-pence, therefore, containing about the same 
quantity of silvei as thirteen shilling and four-pence of our pres- 
ent money (one third pait less than the same nominal sum con- 
tained in the time of Edward III), had in those times been consid- 
ered as what is called the moderate and reasonable price of wheat. 

In 1554, by the ist and id of Philip and Mary, and in 1558, 
by the ist of Elizabeth,'"-* the exportation of wheat was in the same 
manner prohibited, whenever the price of the quarter should ex- 
ceed six shillings and eight-pence, which did not then contain two 
penny worth more silver than the same nominal sum does at pres- 
ent. But it had soon been found that to restrain the exportation of 
wheat till the price was so very low, was in reality, to prohibit it al- 
together. In 1562, therefore, by the 5th of Elizabeth,*** the expor- 
tation of wheat was allowed from certain ports whenever the price 
of the quarter should not exceed ten shillings, containing nearly 
the same quantity of silver as the nominal sum does at present. 
This price had at this time, therefore, been considered as what is 
called the modeiate and reasonable price of wheat. It agrees nearly 
with the estimation of the Noithumberland book in 1512. 

That in France the average price of grain was, in the same man- 
ner, much low'er in the end of the fifteenth and beginning of the 
sixteenth century, than in the two centuries preceding, has been 
observed both by Mr. Dupre de St Maiir, and by the elegant au- 
thor of the Essay on the police of grain. ''*■ Its price, during the 
same period, had probably sunk in the same manner through the 
greater part of Europe 

This rise in the value of silver, in proportion to that of corn, may 
either have been owing altogether to the increase of the demand for 

■"s Ed IV, c 2 

I and 2 P and M c 5, § 7 Licences for exportation, however, are recog- 
nised b\ the \Lt 

“i Eliz , c II § II, which, however, tncielv partialh exempts Noifolk and 
Suffolk Irom rcRulaUons intended to prevent exportation from places where 
no custom-house existed 
s Chz , c S, § 17 

'“Neither his Recherches stir la valeur des Monnoies et sur les prn des 
grains avant et apres le concile de Franejort, 1762, nor his Essat sur les Mon- 
notes, ou reflexions sur le rapport entre I’ argent et les denrees, 1746, contain 
any clear justification for this reference 

'"From 1446 to 151^ “le ble fut plus has que dans les slides prccidents” 
—Essat sui la police getUrale des grains sur leur pnx et sur les eflets de I’agri- 
cullure, 1755 (by C J Herbert), pp 259, 260. 



that metal, in consequence of increasing improvement and cultiva- 
tion, the supply in the mean time continuing the same as before: 
Or, the demand continuing the same as before, it may have been" 
owing altogether to the gradual diminution of the supply; the 
greater part of the mines which were then known in the world, be- 
ing much exhausted, and consequently the expence of working 
them much increased: Or it may have been owing partly to the one 
and partly to the other of those two circumstances. In the end of 
the fifteenth and beginning of the sixteenth centuries, the greater 
part of Europe was approaching towards a more settled form of 
government than it had enjoyed for several ages before. The in- 
crease of security would naturally increase industry and improve- 
ment ; and the demand for the precious metals, as well as for every 
other luxury and ornament, would naturally increase with the in- 
crease of riches. A greater annual produce would require a greater 
quantity of coin to circulate it; and a greater number of rich people 
would require a greater quantity of plate and other ornaments of 
silver. It is natural to suppose too, that the greater part of the 
mines which then supplied the European market with silver, might 
be a good deal e.xhausted, and have become more expensive in the 
working. They had been wrought many of them from the time of 
the Romans. 

It has been the opinion, however, of the greater part of those 
who have written upon the prices of commodities in ancient times, 
that, from the Conquest, perhaps from the invasion of Julius 
Csesar, till the disco\ ery of the mines of .America, the value of sil- 
ver was continually diminishing. This opinion they seem to have 
been led into, partly by the observations which they had occasion 
to make upon the prices both of corn and of some other parts of the 
rude produce of land; and partly by the popular notion, that as the 
quantity of silver naturally increases in every country with the in- 
crease of wealth, so its value diminishes as its quantity increases. 

In their observations upon the prices of corn, three different cir- 
cumstances seem frequently to have misled them. 

First, In ancient times almost all rents were paid in kind; in a 
certain quantity of corn, cattle, poultry, &c. It sometimes hap- 
pened, however, that the landlord would stipulate,®'^ that he should 
be at liberty to demand of the tenant, either the annual payment 
in kind, or a certain sum of money instead of it. The price at which 
the payment in kind was in this manner exchanged for a certain 
sum of money, is in Scotland called the conversion price. As the op- 
tion is always in the landlord to take either the substance or the 

" Ed. I reads “with the tenant” here and omits “of the tenant” in next line. 

i82 xi^e wealth of nations 

price, it is necessary for the safety of the teiicint, that the conver- 
sion price should rather be below than above the average market 
‘ price. In many places, accordingly, it is not much above one-half of 
this price. Through the greater part of Scotland this custom still 
continues with regard to poultry, and in some places with regard to 
cattle. It might probably have continued to take place too with re- 
gard to corn, had not the institution of the public fiars put an end 
to it. These are annual valuations, according to the judgment of an 
assize, of the average price of all the different sorts of grain, and of 
all the different qualities of each, according to the actual market 
price in every different county. This institution rendered it .suffi- 
ciently safe for the tenant, and much more convenient for the land- 
lord, to convert, as they call it, the corn rent, rather at what should 
happen to be the price of the fiars of each year,*'"’ than at any cer- 
tain fixed price. But the writers who have collected the prices of 
corn in ancient times, seem frequently to have mistaken what is 
called in Scotland the conversion price for the actual market price. 
Fleetwood acknowledges, upon one occasion, that he had made this 
mistalce. As he wrote his book, however, for a particular purpose, 
he does not think proper to make this acknowledgment till after 
transcribing this conversion price fifteen times.”'' The price is eight 
shillings the quarter of wheat. This sum in 1423, the year at which 
he begins with it. contained the same quantity of silver as si.\leen 
shillings of our present money. But in 1562, the year at which he 
ends with it, it contained no more than the same nominal sum does 
at present. 

Secondly, Thej' have been misled by the slovenly manner in 
which some ancient statutes of assize had been sometimes tran- 
scribed by lazy copiers ; and sometimes perhaps actually composed 
by the legislature. 

The ancient statutes of assize seem to have begun always with 
determining what ought to be the price of bread and ale when the 
price of wheat and barley were at the lowest, and to have proceeded 
gradually to determine what it ought to be, according as the prices 
of those two sorts of grain should gradually rise above this lowest 
price. But the transcribers of those statutes seem freciuently to 
have thought it sufficient, to copy the regulation as far as the three 
or four first and lowest prices; saving in this manner their own la- 

“ Ed. I reads “rent at the price of the fiars of each year rather.” 

Chronicon Preciosum, J707, pp. 121, 122. Fleetwood does not “acknowl- 
edge any “mistake,” but says that though the price was not the market price 
it might have been “weli agreed upim." His “particular purpose” was to 
prove that in order to qualify for a fellowship a man might conscientiously 
swear his income to be much less than it was. 


hour, and judging, I suppose, that this was enough to show what 
proportion ought to be observed in all higher prices. 

Thus in the assize of bread and ale, of the sist of Henry III, the 
price of bread was regulated according to the different prices of 
wheat, from one shilling to twenty shillings the quarter, of the 
money of those times. But in the manuscripts from which all the 
different editions of the statutes, preceding that of Mr. Ruffhead, 
were printed, the copiers had never transcribed this regulation be- 
yond the price of twelve shillings.™ Several writers, therefore, be- 
ing misled by this faulty transcription, very naturally concluded 
that the middle price, or six shillings the quarter, equal to about 
Mghteen shillings of our present money, was the ordinary or aver- 
age price of wheat at that time. 

In the statute of Tumbrel and Pillory enacted nearly about 
the same time, the price of ale is regulated according to every six- 
pence rise in the price of barley, from two shillings to four shillings 
the quarter. That four shillings, however, was not considered as 
the highest price to which barley might frequently rise in those 
times, and that these prices were only given as an example of the 
proportion which ought to be observed in all other prices, whether 
higher or lower, we may infer from the last words of the statute; 
“et sic deinceps crescetur vel diminuetur per sex denarios.” The ex- 
pression is very slovenly, but the meaning is plain enough; “That 
the price of ale is in this manner to be increased or diminished ac- 
cording to every sixpence rise or fall in the price of barley." In the 
composition of this statute the legislature itself seems to have been 
as negligent as the copiers were in the transcription of the other. 

In an ancient manuscript of the Regiam hlajestatem, an old 
Scotch law book, there is a statute of assize, in which the price of 
bread is regulated according to all the different prices of wheat, 
from ten-pence to three shillings the Scotch boll, equal to about 
half an English quarter. Three shillings Scotch, at the time when ' 
this assize is supposed to have been enacted, were equal to about 
nine shillings Sterling of our present money, hir. Ruddiman’- 
seems to conclude from this that three shillings was the highest 
price to which wheat ever rose in those times, and that ten-pence, 
a shilling, or at most two shillings, were the ordinary prices. Upon 

™The statement is too sweeping. See Statutes of the Realm, vol. i., pp. 
xxiv and 199, notes. RuShead’s edition began to be published in 1762. 

” Judicium Pillorie, temp, incert., ascribed to 51 Hen. III., stat. 6. 

™ Eds. I and 2 read “Rudiman.” 

™ See his preface to Anderson’s Diplomata Scotiae. iSelectus diplomatum et 
numismatum Scotiae thesaurus, 1739, p. 82, and in the translation, An Intro- 
duction to Mr. James Anderson’s Diplomata Scotiae, by Thomas Ruddiman 
M.A., Edinburgh, 1773, pp. 170, 174, 228. The note appears first in cd. 2.] 

i 84 the wealth of NATIONS 

consulting the manuscript, however, it appears evidently, that all 
these prices are only set down as examples of the proportion which 
ought to be observed between the respective prices of wheat and 
bread. The last words of the statute are “reliqua judicabis secun- 
dum praescripta habendo respectum ad pretium bladi.” “You shall 
judge of the remaining cases according to what is above written 
having a respect to the price of corn.’’ 

Thirdly, They seem to have been misled too by the very low 
price at which wheat was sometimes sold in very ancient times; and 
to have imagined, that as its lowest price was then much lower than 
in later times, its ordinary price must likewise have been much 
lower. They might have found, however, that in those ancient 
times, its highest price was fully as much above, as its lowest price 
was below any thing that had ever been known in later times. 
Thus in 1270, Fleetwood gives us two prices of the quarter of 
w'heat.^’ The one is four pounds sixteen shillings of the money of 
those times, equal to fourteen pounds eight shillings of that of the 
present; the other is six pounds eight shillings, equal to nineteen 
pounds four shillings of our present money. Xo price can be found 
in the end of the fifteenth, or beginning of the sixteenth century, 
which approaches to the extravagance of these. The price of corn, 
though at all times liable to variation,"” varies most in those tur- 
bulent and disorderly societies, in which the interruption of all 
commerce and communication hinders the plenty of one part of the 
country from relieving the scarcity of another. In the disorderly 
state of England under the I’lantagenets, who governed it from 
about the middle of the twelfth, till towards the end of the fifteenth 
century, one district might be in plenty, while another at no great 
distance, by having its crop destroyed either by some accident of 
the seasons, or by the incursion of some neighbouring baron, might 
be suffering all the horrors of a famine; and yet if the lands of some 
hostile lord were interposed between them, the one might not be 
able to give the least assistance to the other. Under the vigorous 
administration of the Tudors, who governed England during the 
latter part of the fifteenth, and through the whole of the sixteenth 

‘‘The manuscript appears to be the Alexander B'oulis MS., now 25. 4. 10. 
in the Edinburgh Advocates’ Library, No. viii. of the MSS., described in 
Ads oj the Parliaments of Scotland, vol. i. The exact words arc “Memoran- 
dum quod reliqua judicabis secundum praedicta habendo respectum ad prae- 
scripta bladi precium duplicando.” 

’ CJironkon Preciosuiii, p. 78. Fleetwood quotes the author of Antiq. Bri- 
tan. m Vita Jolt. Pecham as saying that “provisions were so scarce that par- 
ents did eat their own children.” 

'“Eds. I t!) 3 read “variations.” 


century, no baron was powerful enough to dare to disturb the pub- 
lic security. 

The reader will find at the end of this chapter all the prices of 
wheat which have been collected by Fleetwood from 1202 to iS 97 i 
both inclusive, reduced to the money of the present times, and di- 
gested according to the order of time, into seven divisions of twelve 
years each. At the end of each division too, he will find the average 
price of the twelve years of which it consists. In that long period of 
time, Fleetwood has been able to collect the prices of no more than 
eighty years, so that four years are wanting to make out the last 
twelve years. I have added, therefore, from the accounts of Eton 
College, the prices of 1598, 1599, 1600, and 1601.'^'^ It is the only 
addition which I have made. The reader will see, that from the be- 
ginning of the thirteenth, till after the middle of the sixteenth cen- 
tury, the average price of each twelve years grows gradually lower 
and lower: and that towards the end of the sixteenth century it be- 
gins to rise again. The prices, indeed, which Fleetwood has been 
able to collect, seem to have been those chiefly which were remark- 
able for extraordinary dearness or cheapness; and I do not pretend 
that any very certain conclusion can be drawn from them. So far, 
however, as they prove any thing at all, they confirm the account 
which I have been endeavouring to give. Fleetwood himself, how- 
ever, seems, with most other writers, to have believed,’^® that during 
all this period the value of silver, in consequence of its increasing 
abundance, was continually diminishing. The prices of corn which 
he himself has collected, certainly do not agree with this opinion. 
They agree perfectly with that of Mr. Dupre de St. Maur, and 
with that which I have been endeavouring to e.xplain. Bishop Fleet- 
wood and Mr. Dupre de St. Maur are the two authors who seem to 
have collected, with the greatest diligence and fidelity, the prices 
of things in ancient times. It is somewhat curious that, though their 
opinions are so very different, their facts, so far as they relate to 
the price of corn at least, should coincide so very exactly. 

It is not, however, so much from the low price of corn, as from 
that of some other parts of the rude produce of land, that the most 
judicious writers have inferred the great value of silver in those 
very ancient times. Corn, it has been said, being a sort of manufac- 
ture, was, in those rude ages, much dearer in proportion than the 

■■ Sec the table, pp. 251-255 below. 

"This appears to be merely an inference from the fact that he does not 
take notice of fluctuations. 

’'Above, p. iSo. 



greater part of other commodities; it is meant, I suppose, than the 
greater part of unmanufactured commodities; such as cattle, poul- 
try, game of all kinds, &c. That in those times of poverty and bar- 
barism these were proportionably much cheaper than corn, is un- 
doubtedly true. But this cheapness was not the effect of the high 
value of silver, but of the low value of those commodities. It was 
not because silver would in such times purchase or represent a 
greater quantity of labour, but because such commodities would 
purchase or represent a much smaller quantity than in times of 
more opulence and improvement. Silver must certainly be cheaper 
in Spanish America than in Europe; in the country where it is pro- 
duced, than in the country to which it is brought, at the expence of 
a long carriage both by land and by sea, of a fraight and an insur- 
ance. One-and-twenty pence halfpenny sterling, however, we are 
told by Ulloa, was, not many years ago, at Buenos Ayres, the price 
of an ox chosen from a herd of three or four hundred.**^ Sixteen 
shillings sterling, we are told by Mr. Byron, was the price of a good 
horse in the capital of Chili.*^ In a country naturally fertile, but of 
which the far greater part is altogether uncultivated, cattle, poul- 
try, game of all kinds, &c. as they can be acquired with a very small 
quantity of labour, so they will purchase or command but a very 
small quantity. The low money price for which they may be sold, 
is no proof that the real value of silver is there very high, but that 
the real value of those commodities is very low. 

Labour, it must always be remembered, and not any particular 
commodity or set of commodities, is the real measure of the value 
both of silver and of all other commodities. 

But in countries almost waste, or but thinly inhabited, cattle, 
poultry, game of all kinds, &c. as they are the spontaneous produc- 
tions of nature, so she frequently produces them in much greater 
quantities than the consumption of the inhabitants requires. In 
such a state of things the supply commonly exceeds the demand. In 
different states of society, in different stages of improvement, there- 
fore, such commodities will represent, or be equivhlent to, very 
different quantities of labour. 

In every state of society, in every stage of improvement, corn 
is the production of human industry. But the average produce of 

“ Ed. 1 reads “that” instead of “because.” here and also two lines above. 

‘^Voyage historigue de I’Ameriqjie meridionale, vol, i , p. 552, where, how- 
ever, the number of cattle is two or three hundred, as correctly quoted above, 
p. 148. 

^Narrative of the Hon. John Byron, containing an account of the Great 
Distresses sufered by himself and his companions on the Coast of Patagonia 
from 1740 to 1746, 1768, pp. 212, 220. 


every sort of industry is always suited, more or less exactly, to the 
average consumption ; the average supply to the average demand. 
In every different stage of improvement, besides, the raising of 
equal quantities of corn in the same soil and climate, will, at an 
average, require nearly equal quantities of labour ; or wdiat comes 
to the same thing, the price of nearly equal quantities; the con- 
tinual increase of the productive powers of labour in an improv- 
ing state of cultivation being more or less counterbalanced by 
the continually increasing price of cattle, the principal instru- 
ments of agriculture. Upon all these accounts, therefore, we may 
rest assured, that equal quantities of corn will, in every state of 
society, in every stage of improvement, more nearly represent, or 
be equivalent to, equal quantities of labour, than equal quantities 
of any other part of the rude produce of land. Corn, accordingly, 
it has already been observed,*** is, in all the different stages of 
wealth and improvement, a more accurate measure of value than 
any other commodity or set of commodities. In all those different 
stages, therefore, we can judge better of the real value of silver, by 
comparing it with corn, than by comparing it with any other com- 
modity, or set of commodities. 

Corn, besides, or whatever else is the common and favourite 
vegetable food of the people, constitutes, in every civilized coun- 
try, the principal part of the subsistence of the labourer. In con- 
sequence of the e.xtension of iigriculture, the land of every country 
produces a much greater quantity of vegetable than of animal 
food, and the labourer every-where lives chiefly upon the whole- 
some food that i' cheapest and most abundant. Butcher ’s-meat, 
except in the most thriving countries, or where labour is most 
highly reviMi'ded, makes but an insignificant part of his subsist- 
ence ; poultry makes a still smaller part of it, and game no part of 
it. In France, and even in Scotland, where labour is somewhat 
better tewarded than in France, the labouring poor seldom eat 
butcher's-meat, except upon holidays, and other extraordinary oc- 
casions. The hioney price of labour, therefore, depends much 
more upon the average nmney price of corn, the subsistence of the 
labourer, than upon that of biitchcr’s-meat, or of any other part 
of the rude produce of land. The real value of gold and silver, 
therefore, the real quantity of labour which tliey can purchase or 
command, depends much more upon the quantity of corn which 
they can purchase or command, than upon that of butcher’s-meat, 
or any other part of the rude produce of land. 

Such slight observations, however, upon the prices either of 

“Misprinted “improved" in ed. $. "Above, p. 38. 

iS8 the wealth of nations 

corn or of other commodities, would not probably have misled so 
many intelligent authors, had they not been influenced, at the 
same time, by the popular notion,®* that as the quantity of silver 
naturally increases in every country with the increase of wealth, 
so its value diminishes as its quantity increases. This notion, how- 
ever, seems to be altogether groundless. 

The quantity of the precious metals may increase in any coun- 
try from two different causes; either, first, from the increased 
abundance of the mines which supply it; or, secondly, from the 
increased wealth of the people, from the increased produce of 
their annual labour. The first of these causes is no doubt neces- 
sarily connected with the diminution of the value of the precious 
metals: but the second is not. 

When more abundant mines are discovered, a greater quantity 
of the precious metals is brought to market, and the quantity of 
the necessaries and conveniences of life for which they must be 
exchanged being the same as before, equal quantities of thu 
metals must be exchanged for smaller quantities of commodities. 
So far, therefore, as the increase of the quantity of the precious 
metals in any country arises from the increased abundance of the 
mines, it is necessarily connected with some diminution of their 

When, on the contrary, the wealth of any country increases 
when the annual produce of its labour becomes gradually greater 
and greater, a greater quantity of coin becomes necessary in order 
to circulate a greater quantity of commodities: and the people, a- 
they can afford it, as they have more commodities to give for it. 
will naturally purchase a greater and a greater quantity of plate. 
The quantity of their coin will increase from necessity; the quan- 
tity of their plate from vanity and ostentation, or from the same 
reason that the quantity of fine statues, pictures, and of every 
other luxury and curiosity, is likely to increase among them. But 
as statu3r;es and painters are not likely to be worse rewarded in 
times of wealth and prosperity, than in times of jloverty and de- 
pression, so void and silver are not likely to be paid for. 

The price of gold and silver, when the accidental discovery of 
more abundant mines does not keep it down, as it naturally rises 
with the wealth of every country, so, whatever be the state of the 
mines, it is at all times naturally higher in a rich than in a poor 
country. Gold and silver, like all other commodities, naturally 
seek the rnarket where the best price is given for them, and the 
best price is commonly given for every thing in the country which 

Ed. I reads “had they not been agreeable to the popular notion.” 


can. best affoi d it. Labour, it must be remembered, is the ultimate 
price wliich is paid for every thing, and in countries where labour 
is equally veil rewarded, the money price of labour will be in pro- 
portion 10 of the subsistence of the labourer. But gold and sil- 
ver will naturally e.'icbange for a greater quantity of subsistence 
in a rich than in a poor country, in a country which abounds with 
subsistence, than in one which is but indifferently supplied with it. 
If the two countries are at a great distance, the difference may be 
very great; because though the metals naturally fly from the 
worse to the better market, yet it may be difficult to transport 
them in such quantities as to bring their price nearly to a level in 
both. If the countries are near, the difference will be smaller, and 
may sometimes be scarce perceptible; because in this the 
tran.siDortation will he easy. China is a much richer country than 
any pari of F.urope. aiid the difference between Ihe price of sub- 
sistence in (Jliina and in Europe is very great. Rice in China is 
much cheaper than wheat is any-where in Europe. England is a 
much richer country than Scotland; but the difference between 
the money-price of corn in two countries is much smaller, 
and is but just perceptible. In proportion to the quantity or meas- 
ure, Scotch corn generally appears to be a good deal cheaper than ; but in proportion to its quality, it is certainly somewhat 
dearer. Scotland receives almost every year very large supplies 
from England, and every commodity must commonly be some- 
what dearer in the country to which it is brought than in that 
from which it comes. English com, therefore, must be dearer in 
Scotland than in England, and yet in proportion to its quality, or 
to the quantity and goodness of the flour or meal which can be 
made from it, it cannot commonly be sold higher there than the 
Scotch corn which comes to market in competition with it. 

The difference between the money price of labour in China and 
in Europe, is still greater than that between the money price of 
subsistence; because the real recompence of labour is higher in 
Europe than in China, the greater part of Europe being Li an im- 
proving state, while China seems to be standing still. The money 
price of labour is lower in Scotland than in England, because the 
real recompence of labour is much lower; Scotland, though ad- 
vancing to greater wealth, is advancing much more slowly than 
England.®® The frequency of emigration from Scotland, and the 
rarity of it from England, sufficiently prove that the demand for 
labour is very different in the two countries.®' The proportion be- 
tween the real recompence of labour in different countries, it must 

Above, p. 90. ” This sentence is not in cd. i. 

igo th? wealth of nations 

be remembered, is naturally regulated, not by their actual wealth 
or poverty, but by their advancing, stationary, or declining con- 

Gold and silver, as they are naturally of the greatest value 
among the richest, so they are naturally of the least value among 
the poorest nations. Among savages, the poorest of all nations, 
they are of scarce any value. 

In great towns corn is always dearer than in remote parts of 
the country. This, however, is the effect, not of the real cheapness 
of silver, but of the real dearness of corn. It does not cost less la- 
bour to bring silver to the great town than to the remote parts of 
the country; but it costs a great deal more to bring corn. 

In some very rich and commercial countries, such as Holland 
and the territory of Genoa, corn is dear for the same reason that 
it is dear in great towns. They do not produce enough to maintain 
their inhabitants. They are rich in the industry and skill of their 
artificers and manufacturers; in every sort of machinery which 
can facilitate and abridge labour; in shipping, and in all the other 
instruments and means of carriage and commerce: but they are 
poor in corn, which, as it must be brought to them from distant 
countries, must, by an addition to its price, pay for the carriage 
from those countries. It does not cost less labour to bring siher 
to -Amsterdam than to Dantzick; but it costs a great deal more to 
bring corn. The real cost of silver must be nearly the same in both 
places; but that of corn must be very different. Diminish the real 
opulence either of Holland or of the territory of Genoa, while the 
number of their inhabitants remains the same; diminish their 
power of supplying themselves from distant countries; and the 
price of corn, instead of sinking with that diminution in the quan- 
tity of their silver, which must necessarily accompany this declen- 
sion either as its cause or as its effect, will rise to the price of a 
famine. When we are in want of necessaries we must part with all 
superfluities, of which the value, as it rises in times of opulence 
and prosperity, so it sinks in times of poverty and distress. It is 
otherwise with necessaries. Their real price, the quantity of labour 
which they can purchase or command, rises in times of poverty 
and distress, and sinks in times of opulence and prosperity, which 
are always times of great abundance; for they could not other- 
wise be times of opulence and prosperity. Corn is a necessary, sil- 
ver is only a superfluity. 

^ Whatever, therefore, may have been the increase in the quan- 
tity of the precious metals, v/hich, during the period between the 
middle of the fourteenth and that of the sixteenth century, arose 


from the increase of wealth and improvement, it could have no 
tendency to diminish their value either in Great Britain, or in any 
other part of Europe. If those who have collected the prices of 
things in ancient times, therefore, had, during this period, no rea- 
son to infer the diminution of the value of silver, from any obser- 
vations which they had made upon the prices either of corn or of 
other commodities, they had still less reason to infer it from any 
supposed increase of wealth and improvement. 

Second Period 

But how various soever may have been the opinions of the 
learned concerning the progress of the value of silver during this 
first period, they are unanimous concerning it during the second. 

From about 1570 to about 1640. during a period of about sev- 
enty years, the variation in the proportion between the value of 
silver and that of corn, held a quite opposite course. Silver sunk in 
its real value, or would exchange for a smaller quantity of labour 
than before ; and corn rose in its nominal price, and instead of be- 
ing commonly sold for about two ounces of silver the quarter, or 
about ten shillings of our present money, came to be sold for six 
and eight ounces of silver the quarter, or about thirty and forty 
shillings of our present money. 

The discovery of abundant mines of America, seems to have 
been the sole cause of this diminution in the value of silver in pro- 
portion to that of corn. It is accounted for accordingly in the same 
manner by every body: and there never has been any dispute 
either about the fact, or about the cause of it. The greater part of 
Europe was, during this period, advancing in industry and im- 
provement, and the demand for silver must consequently have 
been increasing. But the increase of the supply had, it seems, so 
far exceeded that of the demand, that the value of that metal sunk 
considerably. The discovery of the mines of America, it is to be 
observed, doe^ not seem to have had any very sensible effect upon 
the prices of things in England till after 1570; though even the 
mines of Potosi had been discovered more than twenty years 

From 1595 to 1620, both inclusive, the average price of the 
quarter of nine bushels of the best wheat at Windsor market, ap- 
pears from the accounts of Eton College,*” to have been 2I. is. td. 

“In 134s. Ed. T reads “thirty” instead of “twenty.” In ed. 2 the correction 
is in the errata. See below p. 201, notes 4 and 3. 

“ See the table at the end of the chapter, p. 236. 

192 th:i5 wealth of nations 

From which sum, neglecting the fraction, and deducting a 
ninth, or 45. yd. the price of the quarter of eight bushels comes 
fiut to have been il. i6j. lod. -j. And from this sum, neglecting 
likewise the fraction, and deducting a ninth, or 4J. id. J, for the 
difference between the price of the best wheat and that of the 
middle wheat,^“ the price of the middle wheat comes out to have 
been about il. 12s. Sd. or about six ounces and one-third of an 
ounce of silver. 

From 1621 to 1636, both inclusive, the average price of the 
same measure of the best wheat at the same market, appears, from 
the same accounts, to have been 2/. ror.; from which making the 
like deductions as in the foregoing case, the average price of the 
quarter of eight bushels of middle wheat comes out to have been 
if. 19s. 6 d. or about seven ounces and two-thirds of an ounce of 

Third Period 

Between 1630 and 1640, or about 1636. the effect of the discov- 
ery of the mines of America in reducing the value of silver, ap- 
pears to have been completed, and the value of that metal seems 
never to have sunk lower in proportion to that of corn than it was 
about that time. It seems to have risen somewhat in the course of 
the present century, and it had probably begun to do so even 
some time before the end of the last. 

From 1637 to 1700, both inclusive, being the sixty-four last 
years of the last century, the average price of the quarter of nine 
bushels of the best wheat at Windsor market, appears, from the 
same accounts, to have been 2I. iis. o(f, which is only is. od. 
i dearer than it had been during the sixteen years before. But in 
the course of these sixty-four years there happened two events 
which must have produced a much greater scarcity of corn than 
what the course of the seasons would otherwise have occasioned, 
and which, therefore, without supposing any furthe'r reduction in 
the value of silver, will much more than account for this very 
small enhancement of price. 

The first of these events was the civil war, which, by discourag- 
ing tillage and interrupting commerce, must have raised the price 
of corn much above what the course of the seasons would othcr- 

"“The deduction of this ninth is recommended by Charles Smith, Three 
Tracis on the Corn Trade and Com Laws, 2nd cd., 1766, p. 104, because, “it 
hath been found that the value of all the wheat fit for bread, if mixed to- 
gether, would be eight-ninths of the value of the bc^t wheat.” 


wise have occasioned. It must have had this effect more or less at 
all the different markets in the kingdom, but particularly at those 
in the neighbourhood of London, which require to be supplied 
from the greatest distance. In 1648, accordingly, the price of the 
best wheat at Windsor market, appears, from the same accounts, 
to have been 4/. $s. and in 1649 to have been 4/. the quarter of 
nine bushels. The excess of those two years above il. iQs. (the 
average price of the sixteen years preceding 1637) is 5I. s^.; 
which divided among the sixty-four last years of the last century, 
will alone very nearly account for that small enhancement of price 
which seems to have taken place in them. These, however, though 
the highest, are by no means the only high prices which seem to 
have been occasioned by the civil wars. 

The second event was the bounty upon the exportation of corn, 
granted in 1688.''' The bounty, it has been thought by many 
people, by encouraging tillage, may, in a long course of years, 
have occasioned a greater abundance, and consequently a greater 
cheapness of corn in the home-market, than what would other- 
wise have taken place there. How far the bounty could produce 
this effect at any time, I shall examine hereafter,'*" I shall only 
observe at present, that between 1688 and 1700, it bad not time 
to produce any such effect.'*' During this short period its only 
effect must have been, by encouraging the exportation of the sur- 
plus produce of every year, and thereby hindering the abundance 
of one year from compensating the scarcity of another, to raise 
the price in the home-maiket. The scarcity which prevailed in 
England from 1693 to 1699, both inclusive, though no doubt 
principally owing to the badness of the seasons, and, therefore, 
extending through a considerable part of Europe, must have been 
somewhat enhanced by the bounty. In 1699 accordingly, the fur- 
ther exportation of corn was prohibited tor nine months.'*’ 

'“By I W &. M , c "An act foi the cncouia'niiR the exportation of 
corn,” the preamble ot which alleges that “it hath been lound be experience, 
that the expoitation ot com and gram into toreign pait*-, when the price 
thercot is at a low latc in tliia kingdom, hath been a gieat ad\ intagc not only 
to the owners ot land but to Ihc trade ol thi-> kingdom m general ” It pro- 
vides that when malt or bailey does not exceed 24s per Winchester quarter, 
rye 42s and wheat 485 in anj port, every person cxpoitmg such corn on an 
English ship with a crew at least two-thirds English shall receive fiom the 
Customs 2s. 6d for every quarter of barley or malt, 3s. 6d. for every quar- 
ter of rj e and ss for every quarter of wheat. 

“ Below, pp. 471 - 48 . 1 - 

“ In place of “How far the bounty could produce this effect at any time I 
shall examine hereaftei I shall only observe at present that,” ed i reads 
simply “But ” 

For “not” ed i reads “no,” and for “any such” it reads “this ” 

“ The Act 10 Will III , c 3, prohibits exportation for one year from loth 


There was a third event which occurred in the course of the 
same period, and which, though it could not occasion any scarcity 
of corn, nor, perhaps, any augmentation in the real quantity of 
silver which was usually paid for it, must necessarily have occa- 
sioned some augmentation in the nominal sum. This event was 
the great debasement of the silver coin, by clipping and wear- 
ing. This evil had begun in the reign of Charles II and had gone 
on continually increasing till 1695; at which time, as we may 
learn from Mr. Lowmdes, the current silver coin was, at an aver- 
age, near five-and-twenty per cent, below its standard value.'*' 
But the nominal sum which constitutes the market-price of every 
commodity is necessarily regulated, not so much by the quantity 
of silver, which, according to the standard, ought to be contained 
in it, as by that which, it is found by experience, actually is con- 
tained in it. This nominal sum, therefore, is necessarily higher 
when the coin is much debased by clipping and wearing, than 
when near to its standard value. 

In the course of the present century, the silver coin has not at 
any time been more below its standard weight than it is at pres- 
ent. But though very much defaced, its value has been kept up by 
that of the gold coin for which it is exchanged."'* For though be- 
fore the late re-coinage, the gold coin was a good deal defaced too, 
it was less so than the silver. In 1695, on the contrary, the value 
of the silver coin was not kept up by the gold coin; a guinea then 
commonly exchanging for thirty shillings of the worn and dipt 
silver.'"" Before the late re-coinage of the gold, the price of silver 

February, 1699 The mistake “nine months” is probablv due to a misreadmi; 
of C. Smith, Tracts on the Corn Ttade, p 9, wheat “glowing, .ind continuing 
dearer till 1698, the exportation W'as forbid for one yLdr, and then loi nine 
months the bounty was suspended” (cp pp 44, 119) ■ts a nutter of fact, the 
bounty was suspended by ii & ir Will III, c i, from oth Februaix 1699 
to 29th September, 1700, or not much raoic than se\cn months and a halt 
The Act II & 12 Will in , c i, alleges that the .\ct gianlmg the bounti “w'as 
grounded upon the highest wisdom and prudence and has =u(.teidcd to the 
greatest benefit and advantage to the nation b\ the gioate't encouragement 
of tillage,” and only suspends it because “it appears that |lie present stock 
and quantity of corn in this kingdom max not be sufficient lor the use and 
service of the people at home should there be loo great an exportation into 
parts beyond the seas, which many persons may be piompted to do for their 
own private advantage and the lucre of the said bountv " — Statutes of the 
Realm, vol vii , p 544 

'"For “debasement” cd i reads “degradation ” 

“ Lowndes says on p 107 of his Report Containing an Essay for the Am- 
endment of the Stiver Coins, 1695, “the moneys commonly current arc dimin- 
ished near one-half, to wit, in a proportion something grcatci than that of ten 
to twenty -two ” But in the text above, the popular estimate, as indicated by 
silx’er bullion, is accepted, as in the next paragraph, 

Ed I reads “degraded ” See above, p 41 

Lowndes, Essay, p 88. 


bullion was seldom higher than five shillings and seven-pence an 
ounce, which is but five-pence above the mint price. But in 1695, 
the common price of silver bullion was six shillings and five-pence 
an ounce, which is fifteen-pence above the mint price. Even 
before the late re-coinage of the gold,^"’ therefore, the coin, gold 
and silver together, when compared with silver bullion, was not 
supposed to be more than eight per cent, below its standard value. 
In 169s, on the contrary, it had been supposed to be near five- 
and-twenty per cent, below tliat value. But in the beginning of 
the present century, that is, immediately after the great re-coin- 
age in King AVilliam’s time, the greater part of the current silver 
coin must have been still nearer to its standard weight than it is at 
present. In the course of the present century too there has been no 
great public calamity, such as the civil war, which could either 
discourage tillage, or interrupt the interior commerce of the coun- 
try. And though the bounty which has taken place through the 
greater part of this century, must always raise the price of corn 
somewhat higher than it otherwise would be in the actual state of 
tillage; yet as,. in the course of this century, the bounty has 
had full time to produce all the good effects commonly imputed to 
it, to encourage tillage, and thereby to increase the quantity of 
corn in the home market, it may, upon the principles of a system 
which I shall explain and examine hereafter,^®* be supposed to 
have done something to lower the price of that commodity the one 
way, as well as to raise it the other. It is by many people sup- 
posed to have done more.^®'’ In the sixty-four first years of the 
present century accordingly, the average price of the quarter of 
nine bushels of the best wheat at Windsor market, appears, by 
the accounts of Eton College, to have been 2I. os. 6 ( 1 . which 
is about ten shillings and sixpence, or more than five-and-twenty 
per cent, cheaper than it had been during the sixty-four last 
years of the last century; and about nine shillings and sixpence 
cheaper than it had been during the sixteen years preceding 1636, 

’“Lowndes’s Essay on the Silver Coin, p. 68. This note appears first in 
ed. 2 . 

’"Above, p. 41. 

’“The meaning is “given a certain area and intensity of cultivation, the 
bounty will raise the price of corn.” 

’“ Ed. I docs not contain “upon the principles of a system which I shall 
explain hereafter.” The reference is presumably to pp. 47.3-483- 

’“ Ed. T reads here “a notion which I shall examine hereafter.” 

’“ Doubtless by a misprint ed. s omits “first.” The term is used again at 
the end of the paragraph and also on pp. 197, rgS. 

’" See the table at the end of the chapter: J-! is a mistake for^i. 

“"The 25 per cent, is erroneously reckoned on the la os. 65|d. instead of 
on the £2 ns. ojd. The fall of price is rcaily less than 21 per cent. 


when the discovery of the abundant mines of America may be 
supposed to have produced its full effect; and about one shilling 
cheaper than it had been in the twenty-six years preceding 1620, 
before that discovery can well be supposed to have produced its 
full effect. According to this account, the average price of middle 
wheat, during these sixty-four first years of the present century, 
comes out to have been about thirty-two shillings the quarter of 
eight bushels. 

The value of silver, therefore, seems to have risen somewhat in 
proportion to that of corn during the course of the present cen- 
tury, and it had probably begun to do so even some time before 
the end of the last. 

In 1687, the price of the quarter of nine bushels of the best 
wheat at Windsor market was if. 51. 2d. the lowest price at which 
it had ever been from 1595. 

In 1688, Mr. Gregory King, a man famous for his knowledge in 
matters of this kind, estimated the average price of wheat in years 
of moderate plenty to be to the grower 31. bd. the bushel, or eight- 
and-twenty shillings the quarter.^**® The grower’s price I under- 
stand to be the same with what is sometimes called the contract 
price, or the price at which a farmer contracts for a certain num- 
ber of years to deliver a certain quantity of corn to a dealer. .Vs a 
contract of this kind saves the farmer the expence and trouble of 
marketing, the contract price is generally low’er than what i.s sup- 
posed to be the average market price. Mr. King had judged eight- 
and-twenty shillings the quarter to be at that time the ordinary 
contract price in years of moderate plenty. Before the scarcity 
occasioned by the late extraordinary course of bad seasons, it was, 
I have been assured,'’ the ordinary contract price in all common 

In 1688 was granted the parliamentary bounty upon the exporta- 
tion of corn.”* The country gentlemen, who then composed a still 
greater proportion of the legislature than they do at present, had 
felt that the money price of corn was falling. The boi.nly was an ex- 

'■“The date is taken from the hcadioR of Scheme 1) in Davenant, Eswy 
upon the Probable Means of Making a People Gainers in the Balance of 
Trade, i6pq, p. 22, Works, cd. Whitworth, 1771, vol. ii., p. 1S4. Cp. Natural 
and Political Observations and Conclusions upon the State and Condition of 
England, by Gregory King. Esq., Lancaster, H., in George Chalmers’ Edi- 
male of the Comparative Strength of Great Britain, 1802. p. 429; in Dave- 
nant, Balance of Trade, pp. 71, 72, Works, vol. ii., p. 217. Davenant says “this 
value ip what the same is worth upon the spot where the corn grew ; but this 
value is increased by the carriage to the place where it is at last spent, at 
least } part more.” 

Ed. I does not contain this parenthesis. 

Above, p. 193, note. 


pedient to raise it arlifiLally to the high price at which it had fre- 
quently been sold in the times of Charles I. and II. It was to take 
place, therefore, till wheat was so high as forty-eight shillings the 
quarter; that is twenty shillings, or |ths dearer than Mr. King 
had in that very year estimated the grower’s price to be in times of 
moderate plenty. If his calculations deserve any part of the reputa- 
tion which they have obtained very universally, eight-and-forty 
shillings the quarter was a price which, without some such expedi- 
ent as the bounty, could not at that time be expected, except in 
years of extraordinary scarcity. But the government of King Wil- 
liam was not then fully settled. It was in no condition to refuse any 
thing to the country gentlemen, from whom it was at that very 
time soliciting the first establishment of the annual land-tax. 

The value of silver, therefore, in proportion to that of corn, had 
probably risen somewhat before the end of the last century: and it 
seems to have continued to do so during the course of the greater 
part of the present; though the necessary operation of the bounty 
must have hindered that rise from being so sensible as it otherwise 
would have been in the actual state of tillage. 

In plentiful years the bounty, by occasioning an extraordinary 
exportation, necessarily raises the price of corn above what it other- 
wise would be in those years. To encourage tillage, by keeping up 
the price of corn even in the most plentiful years, W'as the avowed 
end of the Institution. 

In years of great scarcity. Indeed, the bounty has generally been 
suspended. It must, however, have had some effect even upon the 
prices of many of those years. By the extraordinary exportation 
which it occasions in years of plenty, it must frequently hinder the 
plenty of one year from compensating the scarcity of another. 

Both in years of plenty and in years of scarcity, therefore, the 
bounty raises the pn'ce of corn above what it naturally would be in 
he actual state of tillage. If, during the sixty-four first }’ears of the 
■sresenL century, therefore, the average price has been lower than 
during the sixty-four last years of the last century, it must, in the 
same state of tillage, have been much more so, had it not been for 
this operation of the bounty. 

But without the bounty, it may be said, the state of tillage would 
not have been the same. What may have been the effects of this 
mstitution upon the agriculture of the country, I shall endeavour 
to explain hereafter,” “ when I come to treat particularly of boun- 
ties. I shall only observe at present, that this rise in the value of 

’“Ed. s. doubtless by a misprint, omit' “evi-n.” 

’’’Below, pp. 473-483. 


silver, in proportion to that of com, has not been peculiar to Eng- 
land. It has been observed to have taken place in France during the 
same period, and nearly in the same proportion too, by three very 
faithful, diligent, and laborious collectors of the prices of corn, Mr. 
Dupre de St. Maur, Mr. Messance, and the author of the Essay on 
the police of grain. But in France, till 1764, the exportation of 
grain was by law prohibited; and it is somewhat difficult to sup- 
pose, that nearly the same diminution of price which took place in 
one country, notwithstanding this prohibition, should in another be 
owing to the extraordinary encouragement given to exportation. 

It would be more proper, perhaps, to consider this variation in 
the average mone}' price of corn as the effect rather of some gradual 
rise in the real value of silver in the European market, than of any 
fall in the real average value of corn. Corn, it has already been ob- 
served,^^'’ is at distant periods of time a more accurate measure of 
value than either silver, or perhaps any other commodity. When, 
after the discovery of the abundant mines of America, corn rose to 
three and four times its former money price, this change was uni- 
versally ascribed, not to any rise in the real value of corn, but to a 
fall in the real value of silver. If during the sixty-four first years of 
the present century, therefore, the average money price of corn has 
fallen somewhat below what it had been during the greater part of 
the last century, we should in the same manner impute this change, 
not to any fall in the real value of corn, but to some rise in the real 
value of silver in the European market. 

The high price of corn during these ten or twelve years past, in- 
deed, has occasioned a suspicion that the real value of silver still 
continues to fall in the European market. This high price of corn, 
however, seems evidently to have been the effect of the extraordin- 
ary unfavourableness of the seasons, and ought therefore to be re- 
garded, not as a permanent, but as a transitory and occasional 
event. The seasons for these ten or twelve years past have been un- 
favourable through the greater part of Europe ; and the disorders 
of Poland have very much increased the scarcity in all those coun- 
tries, which, in dear years, used to be supplied from that market. 
So long a course of bad seasons, though not a very common event, 
is by no means a singular one; and whoever has enquired much in- 

“* The references to Dupre de St. Maur and the Essay (see above, p. 180. 
note), as well as the whole argument of the paragraph, are from Messance, 
Recherches sur la popidatioii des generalitis d’ Auvergne, etc., p. 281. Mes- 
sance’s quotations are from Dupre’s Essai sur Ics Monroies, 1 746, p. 68, and 
Herbert’s Essai sur la police ginerale des grains, 1755, pp. ix, 77, 180; cp. be- 
low. p. 240. 

“Above, pp. 35, 36. 

“Examined below, p. 216, 217. 


to the history of the prices of corn in former times, will be at no 
loss to recollect several other examples of the same kind. Ten years 
of extraordinary scarcity, besides, are not more wonderful than ten ‘ 
years of extraordinary plenty. The low price of corn from 1741 to 
1750, both inclusive, may very well be set in opposition to its high 
price during these last eight or ten years. From 1741 to 1750, the 
average price of the quarter of nine bushels of the best wheat at 
Windsor market, it appears from the accounts of Eton College, was 
only iZ. 13J. qd. which is nearly 6s. 3d. below the average 
price of the sixty-four first years of the present century.^^^ The 
average price of the quarter of eight bushels of middle wheat, comes 
out, according to this account, to have been, during these ten years, 
only rZ. 6s. 

Between 1741 and 1750, however, the bounty must have hind- 
ered the price of corn from falling so low in the home market as it 
naturally would have done. During these ten years the quantity of 
all sorts of grain exported, it appears from the custom-house books, 
amounted to no less than eight millions twenty-nine thousand one 
hundred and fifty-six quarters one bushel. The bounty paid for this 
amounted to i,si4,962Z. i7i. 4d. In 1749 accordingly, Mr. 
Pelham, at that time prime minister, observed to the House of 
Commons, that for the three years preceding, a very extraordin- 
ary sum had been paid as bounty for the exportation of corn. He 
had good reason to make this obseivation, and in the following year 
he might have had still better. In that single year the bounty paid 
amounted to no less than 324,i76Z. los. 6d.^®^ It is unnecessary to 

Sep the table at the end of the chapter 
'“This figure is obtained, a-, recommended b\ Charles Smith {Tracts on 
the Corn Tiadc, 1766, p 104) b> deducting one-ninth for the greater size of 
the Windsor measure and one-ninth from the lemamder for the difference be- 
tween best and middling wheat 

"““Tract id,” referred to a few lines farther on, only gives the quantities 
of 'each kind of grain expoited in each jear (pp no, in), =0 that if the 
figures m the text aic t.’kcn from it thca must have been obtained bv some- 
what laborious arithmetical operations The particulars arc as follows — 

Fxported Bounty paaable 
• Qr Bu-h 

Wheat 3784521 I £946111 o 7 V 

Rye 765,oSb 6 153,884 rS 7i 

Bariev, malt and oaU 3 479 S73 - 434,946 18 ij 

S,02Q 156 I £1,514,962 17 

“Years” is apparently a mistake tor “months ” “There is such a super- 
abundance of coin that inciedible quantities have been lately exported I 
should be afraid to mention w hat quantities have been exported if it did not 
appear upon our custom-house books, but from them it appears that lately 
there w'as in three months’ time above £220,000 paid for bounties upon corn 
exported ” — Parliamentary Htstorv {Hansaid), yo\ xiv , p 589 

’"See Tracts on the Coin Trade, Tract 3d This note appears first in ed 


observe how much this forced exportation must have raised the 
price of corn above what it otherwise would have been in the home 

At the end of the accounts annexed to this chapter the reader will 
find the particular account of those ten years separated from the 
rest. He will find there too the particular account of the preceding 
ten years, of which the average is likewise below, though not so 
much below, the general average of the sixty-four first years of the 
century. The year 1 740, however, was a year of extraordinary scar- 
city. These twenty years preceding 1750, may very well be set in 
opposition to the twenty preceding 1770. As the former were a good 
deal below the general average of the century, notwithstanding the 
intervention of one or two dear years; .so the latter have been a good 
deal above it, notwithstanding the intervention of one or two cheap 
ones, of 1759, for e.xample. If the former have not been as much be- 
low the general average, as the latter have been above it, we ought 
probably to impute it to the bounty. The change has eviilently been 
too sudden to be ascribed to any change in the value of silver, 
which is always slow' and gradual. The suddenness of the effect 
can be accounted for only by a cause which can operate suddenly, 
the accidental variation of the seasons. 

The money price of labour in Great Britain has, indeed, risen 
during the course of the present century. This, however, seems to be 
the effect, not so much of any diminution in the value of silver in 
the European market, as of an increase in the demand for laliour 
in Great Britain, arising from the great, and almost universal pros- 
perity of the country. In France, a country not altogether so pros- 
perous, the money price of labour has, since the middle of the last 
century, been observed to sink gradually with the average money 
price of corn. Both in the last century and in the pre.scnt, the day- 
wages of common labour are there said to have been pretty uui- 
formly about the twentieth part of the average price of the .septier 
of wheat, a measure which contains a little more than four Win 
Chester bushels. In Great Britain the real recompeifce of labour, it 
has already been shown,’-- the real (luantities of the necessai ies 
and conveniencics of life which are given to the labourer, has in- 
creased considerably during the of the present century. The 
rise in its money price seems to have been the effect, not of any 
diminution of the value of silver in the general market of Europe , 
but of a rise in the real price of labour in the particular market of 

2. The exports for 1750 are given in C. Smith, ojf. cit.f p, iii, as 947,602 qr. 
I bush, of wheat, 99,049 qr. 3 bush, of r>-e, and 539,538 qr. 5 bush, of barley 
malt and oats. The bounty on these quantities would be £324,176, los. 

Above, pp. 78-78. Ed. i, perhaps correctly, reads "quantity.” 


Great Britain, owing to the peculiarly happy circumstances of the 

For some time after the finst discovery of .-Vmerica, silver would ' 
continue to sell at its former, or not much below its former price. 
The profits of mining w ould for some lime be very great, and much 
above their natural rate. 'I’hose who importeil that metal into Eu- 
rope, however, would soon find that the whole annual importation 
could not be clisposevl of at this high price. Silver would gradually 
exchange for a smaller and a smaller (juantity of goods. Its price 
would sink gradually lower and lower till it fell to its natural price: 
or to wh.'it was just sufficient to pay, according to their natural 
rate^. the wages of the labour, the profits of the stock, and the rent 
of the land, which mu>t be paid in order to bring it from the mine 
to the market. In the greater part of the silver mines ol Peru, the 
tax of the king of .'^pain, amounting to a tenth of the gross pro- 
duce. eats up, it has already been observed.^-"’ the whole rent of the 
land. 'I'his ta.x was originally a half; it soon afterwards fell to a 
third, then to a fifth, and at last to a tenth, at which rate it still con- 
tinues.**’' In the greater part of the silver mines of Peru. this, it 
ijeems, is all that remains, after replacing the stock of the under- 
taker of the work, together with its ordinary profits; and it seems 
to be univer.sally acknowled,god that these profits, which were once 
very high, are now as low as they can well be, consistently with car- 
rying on the works. 

The tax of the king of Spain was reduced to a fifth part of the 
registered silver in 1504,'-' onc-and-forty years before iS4S;^"** 
the date of the discovery of the mines of Potosi. In the course of 
ninety years,*-"’ or before 1636, these mines, the most fertile in all 
.America, had lime sufficient to produce their full effect, or to reduce 
the value of silver in the European market as low as it could well 
fall, while it continued to pa3' this tax to the king of Spain. Ninety 
j-ears is time sufficient to reduce an\' commodity, of which there 
is no monopol)', to its natural price, or to the lowest price at which, 
while it pays a .particular tax, it can continue to be sold for any 
considerable lime together. 

’-'Ed. 1 reads "fifth.” ’“Above, pp. 169, 170. 

’-’’Ed. 1 reads “fell to a third and then to a fifth, at which rate it .still con- 

Solorzano. vol. ii. Solorzano-Pcrcira, De Intiiunim Jure, Madrid, 1777, 
lib. V., c.ip. i., §§ 12, 23; vol. ii., p, 8S3. rol. 2. Ed. 1 docs not contain the 

’"Ed. I reads "one and thirty years before 1535.” The date 1545 is given in 
Solorzano, t>p. cit., vol. ii., p. S82. col. 3. 

Ed. I reads “In the course of a century.” 

Ed. I reads “A hundred years.” 



The price of silver in the European market might perhaps have 
fallen still lower, and it might have become necessary either to re- 
duce the tax upon it, not only to one tenth, as in 1736, but to one 
twentieth, in the same’ manner as that upon gold, or to give up 
working the greater part of the American mines which are now 
wrought.’ The gradual increase of the demand for silver, or the 
gradual enlargement of the market for the produce of the silver 
mines of America, is probably the cause which has prevented this 
from happening, and which has not only kept up the value of silver 
in the European market, but has perhaps even raised it somewhat 
higher than it was about the middle of the last century. 

Since the first discovery of .America, the market for the produce 
of its silver mines has been growing gradually more and more ex- 

First, The market of Europe has become gradually more and 
more extensive. Since the discovery of .America, the greater part of 
Europe has been much improved. England, Holland, France and 
Germany; even Sweden, Denmark, and Russia, have all advanced 
considerably both in agriculture and in manufactures. Italy seems 
not to have gone backwards. The fall of Italy preceded the conquest 
of Peru. Since that time it seems rather to have recovered a little. 
Spain and Portugal, indeed, are supposed to have gone backwards. 
Portugal, however, is but a very small part of Europe, and the de- 
clension of Spain is not, perhaps, so great as is commonly imagined. 
In the beginning of the sixteenth century, Spain was a very poor 
country, even in comparison with France, which has been so much 
improved since that time. It was the well-known remark of the Em- 
peror Charles V. who had travelled so frequently through both 
countries, that every thing abounded in France, but that every 
thing was wanting in Spain. The increasing produce of the agricul- 
ture and manufactures of Europe must necessarily have required a 
gradual increase in the quantity of silver coin to circulate it; and 
the increasing number of wealthy individuals must have required 
the like increase in the quantity of their plate and other ornaments 
of silver. 

Secondly, America is itself a new market for the produce of its 
own silver mines; and as its advances in agriculture, industry, and 
population, are much more rapid than those of the most thriving 
countries in Europe, its demand must increase much more rapidly. 
The English colonies are altogether a new market, which partly 
for coin and partly for plate, requires a continually augmenting 

Ed I reads “lower” instead of “reduce,” and does not contain “not only 
to one-tenth, as in 1736, but to one-twentieth.” See above, p. i6g, note. 



supply of silver Uiruugh a great continent where there never was 
any demand before. The greater part too of the Spanish and Portu- 
guese colonies are altogether new markets. New Granada, the Yuca- ’ 
tan, Paraguay, and the Brazils were, before discovered by the Euro- 
peans, inhabited by savage nations, who had neither arts nor agri- 
culture. A considerable degree of both been introduced into 
all of them. Even IMexico and Peru, thoitgh they cannot be con- 
sidered as altogether new markets, are certainly much more exten- 
sive ones than they ever were before. After all the wonderful tales 
which have been published concerning the splendid state of those 
countries in ancient times, whoever reads, with any degree of sober 
judgment, the history of their first discovery and conquest, will evi- 
dently discern that, in arts, agriculture, and commerce, their in- 
habitants were much more ignorant than the Tartars of the Uk- 
raine are at present. Even the Peruvians, the more civilized nation 
of the two, though they made use of gold and silver as ornaments, 
had no coined money of any kind. Their whole commerce was car- 
ried on by barter, and there was accordingly scarce any division of 
labour among them. Those who cultivated the ground were obliged 
to build their own houses, to make their own household furniture, 
their own clothes, shoes, and instruments of agriculture. The few 
artificers among them are said to have been all maintained by the 
sovereign, the nobles, and the priests, and were probably their serv- 
ants or slaves. .All the ancient arts of Mexico and Peru have never 
furnished one single manufacture to Europe.’ The Spanish armies, 
though they scarce ever exceeded five hundred men, and frequently 
did not amount to half that number, found almost every-where 
great difficulty in procuring subsistence. The famines which they 
are said to have occasioned almost Avherever they went, in countries 
too which at the same time are represented as very populous and 
well-cultivated, sufficiently demonstrate that the story of this popu- 
lousness and high cultivation is in a great measure fabulous. The 
Spanish colonies are under a government in many respects less fa- 
vourable to agsiculture, improvement and population, than that of 
the English colonies.’'’® They seem, how'ever, to be advancing in all 
these much more rapidly than 305'’ country in Europe. In a fertile 
soil and happy climate, the great abundance and cheapness of 
land, a circumstance common to all new colonies, is, it seems, so 
great an advanta,ge as to compensate many defects in civil govern- 
ment. Frezier, who visited Peru in 1 7 13 , represents Lima as contain- 

Below, p. 533 - Raynal, Ilhlairc pliilosophiqm, .Amsterdam ed. 1773, tom. 
iii.. pp. 113, 116, takes the same view of the Peruvians. 

Below, pp. S 33 -SS 4 i fiaiiim. 


ing between twenty-five and twenty-eight thousand inhabitants.^'’'* 
Ulloa, who resided in the same country between 1 740 and 1 746, rep- 
'resents it as containing more than fifty thoiusand.*”'’ The difference 
in their accounts of the populousness of several other principal 
towns in Chili and Peru is nearly the same: and as there seems 

to be no reason to doubt of the good information of either, it marks 
an increase which is scarce inferior to that of the English colonies. 
America, therefore, is a new market for the produce of its own sil- 
ver mines, of which the demand must increase much more rapidly 
than that of the most thriving country in Europe. 

Thirdly. The East Indies is another market for the produce of 
the silver mines of America, and a market which, from the time of 
the first discovery of those mines, has been continually taking off a 
greater and a greater quantity of silver. Since that time, the direct 
trade between America and the East Indies, which is carried on by 
means of the Acapulco ships, has been continually augmenting, 
and the indirect intercourse by the way of I’.urope has been aug- 
menting in a still greater proportion. During the sixteenth century, 
the Portuguese w'ere the only European nation who carried on any 
regular trade to the East Indies. In the last years of that century the 
Dutch began to encroach upon this monopoly, and in a few years 
expelled them from their principal settlements in India. During the 
greater part of the last century those two nations divided the most 
considerable part of the East India trade between them; the trade 
of the Dutch continually augmenting in a still greater proportion 
than that of the Portuguese declined. The English and Erench car- 
ried on some trade wdth India in the last century, but it has been 
greatly augmented in the course of the present. The East India 
trade of the Swedes and Danes began in the course of the present 
century. Even the ^Muscovites now trade regularly with Chiiia by a 
sort of caravans which go over land through Siberia and Tartary to 
Pekin. The East India trade of all these nations, if we except that of 
the French, which the last war had well nigh annihilated, has been 
almost continually augmenting. The increasing oonsumption of 

Voyujie to the South Sea, p. Ji8, but the number mentioned is twenty- 
five to thirty thousand. 

^ Voyage hislorigue, tom. i., p. 443, 445; “sixteen to eighteen thousand 
persons of Spanish extraction, a comparatively small number of Indians and 
half-breeds, the greater part of the population being negroes and mulattoes.” 

Santiago and Callao, Freziir, Tpyugr, pp. 102, 202; Juan and Ul- 
loa, Voyay hrtorique, vol. i., p. 468 ; vol. ii., p. 49. 

Originally one ship, and, after 1720, two ships, were allowed to sail be- 
tween Acapulco in Mexico and the Philippines. For the regulations applied to 
the trade see Uztariz, Theory and Practice of Commerce and Maritime Af- 
fairs, trans, by John Kippax, 1731, vol. i.,pp. 206-208. 


East India goods in Europe is, it seems, so great, as to afford a 
gradual increase of employment to them all. Tea, for e.\ample, was 
a drug very little used in Europe before the middle of the last cen- 
tury. At present the value of the tea annually imported by the Eng- 
lish East India (^ompany. for the use of their own countrymen, 
amounts to m.ore than a million and a half a year: and even this is 
not enough: a great deal more being constantly smuggled into the 
country from the port-, of Holland, from (lottenburg in Sweden, and 
from the coast of France if>o, as long a.s the French East India Com- 
pany was in pro.-perity The consumi)tion of the porcelain of China, 
of the spicerie.s of the ^Moluccas, of the piece goods of Bengal, and 
of innumerable other articles, has increased very nearly in a like 
proportion. The tonnage accordingly of all the European shipping 
employed in the Fast India trade, at any one time during the last 
century, was not. jierhaps. much greater than that of the English India Company before the late reduction of their shipping.’®'* 
But in the East Indies, particularly in China and Indostan, the 
value of the precious metals, when the Europeans first began to 
trade to those countries, was much higher than in Europe: and it 
still continues to be so. In rice countries, which generally yield two, 
soiiietime.s three crops in the year, each of them more plentiful than 
any common crop of corn, the abundance of food must be much 
greater than in any corn country of equal extent. Such countries are 
accordingly much more populous. In them too the rich, having a 
greater super-abundance of foixl to dispose of beyond what they 
themselves can consume, have the means of purchasing a much 
greater quantity of the labour of other people. The retinue of a 
grandee in China or Indostan accordingly i«, by all acLount^, much 
me, re numerous and ‘splendid than that of the richest subjects in Eu- 
rope. The .«ame supcr-abund:ince of food, of which they have the 
disposal, enables them to give a greater c|uantity of it for all those 
singular and rare productions which nature furnishes but in very 
small quantities: .such as the precious metals and the piecious 
stones, the greail objects of the competition of the rich. Though the 
mines, therefore, which supplied the Indian market had been as 
abundant as those which suiiplied the European, such commodities 
would naturally exchange for a greater quantity of food in India 

“Tn order to prevent the consumption of timber fit for the con- 
Ftrortion of larpc ships of war. the Eaisl India Company were prohibited from 
biiiidi’iK, or allowino; to lie built for their service, any now ships, till the ship- 
pins ill their employment should be reduced under .|S ooo tons, or employing 
any .diins built after iSlh March. 177 j. But they arc at liberty to build any 
vessel whatever in India or the colonics, or to charter any vessel built in In- 
dia or the colonics, 12 Geo. III., c. 34.” — Maepherson, Anna/s 0/ Commerce, 
1S03, A.D. 1772. "ol. iii., pp. 521, 322. 

2 o6 the wealth of NATIONS 

than in Europe. But the mines which supplied the Indian market 
with the precious metals seem to have been a good deal less abun- 
dant, and those which supplied it with the precious stones a good 
deal more so, than the mines which supplied the European. The 
precious metals, therefore, would naturall}’ e.vchange in India for 
somewhat a greater quantity of the precious stones, and for a much 
greater quantity of food than in Europe. The monej' price of 
diamonds, the greatest of all superfluities, would be somcwliat 
lower, and that of food, the first of all necessaries, a great deal lower 
in the one country than in the other. But the real price of labour, 
the real quantity of the necessaries of life which is given to the la- 
bourer, it has already been observed,'*^' is lower both in China and 
Indostan, the two great markets of India, than it is through the 
greater part of Europe. The wages of the labourer will there pur- 
chase a .smaller quantity of food: and as the money price of food is 
much lower in India than in Europe, the money pi ice of labour is 
there lower upon a double account; upon account both of the small 
quantity of food which it will purcha.‘'e, and of the low price of that 
food. But in countries of equal art and industry, the money price of 
the greater part of manufactures will be in proportion to the money 
price of labour: and in manufacturing art and industry, China and 
Indostan. though inferor, .seem not to be much inferior to any part 
of Europe. The money price of the greater part of manufactures, 
therefore, will naturally be much lower in those great empires than 
it is any-wlierc in Europe. Through the greater part of Europe loo 
the expence of land-carriage increases very much both the real and 
nominal price of most manufactures. It costs more labour, and 
therefore more money, to bring linst the materials, and after'.\ards 
the complete manufacture to market. In China and Indostan the 
extent and variety of inland navigations save the greater part of 
this labour, and consequently of this money, and thereby reduce 
still lower both the real and the nominal price of the greater part of 
their manufactures. Upon all these accounts, the precious metal.s are 
a commodity which it always has been, and still continues to be, 
extremely advantageous to carry from Europe to India. There is 
scarce any commodity which brings a better price there; or which, 
in proportion to the quantity of labour and commodities which it 
costs in Europe, will purchase or command a greater quantity of la- 
bour and commodities in India. It is mure advantageous too to carry 
silver thither than gold; because in China, and the greater part of 
the other markets of India, the proportion between fine silver and 

Ed. I places ‘‘in India” here instead of in the line above. 

'".\bovc, p. 73. 


fine gold is but as ten, or at most as twelve,'' to one; whereas in 
Europe it is as fourteen or fifteen to one. In China, and the greater 
part of the other markets of India, ten, or at most twelve, ounees of 
silver will purchase an ounce of gold; in Europe it requires from 
fourteen to fifteen ounces. In the cargoes, therefore, of the greater 
part of European ships which sail to India, silver has generally been 
one of the most valuable articles.^'*" It is the most valuable article 
in the .Acapulco ships which sail to Manilla. The silver of the new 
continent seems in this manner to be one of the principal commodi- 
ties by which the commerce between the two extremities of the 
old one is carried on, and it is by means of it, in a great measure,^** 
that those distant parts of the world are connected with one an- 

In order to supply so very widely extended a market, the quan- 
tity of silver annually brought from the mines must not only be 
sufficient to support that continual increase both of coin and of 
plate which is required in all thriving countries; but to repair that 
continual waste and consumption of silver which takes place in all 
countries where that metal is used. 

The continual con.sumption of the precious metals in coin by 
wearing, and in plate both by wearing and cleaning, is very sensible ; 
and in commodities of which the use is so very widely extended, 
would alone require a very great annual supply. The consumption 
of those metals in some particular manufactures, though it may not 
perhaps be greater upon the whole than this gradual consumption, 
is, however, much more sensible, as it is much more rapid. In the 
manufactures of Birmingham alone, the quantity of gold and silver 
annually employed in gilding and plating, and thereby disqualified 
from ever afterwards appearing in the shape of those metals, is 
said to amount to more than fifty thousand pounds sterling. We may 
from thence form some notion how great must be the annual con- 
sumption in all the different parts of the world, either in manufac- 
tures of the same kind with those of Birmingham, or in laces, em- 
broideries, gold and silver stuffs, the gilding of books, furniture, &c. 
A considerable quantity too must be annually lost in transporting 

E;d. I does not contain “or at most as twelve” here and two lines lower 

^“Newton, in his Representation to the Lords of the Treasury, 1717 (re- 
printed in the Universal Merchant, quoted on the next page), says that in 
China and Japan the ratio is 9 or 10 to i and in India 12 to i, and this car- 
ries away the silver from all Europe. Magens, in a note to this passage ( Uni- 
versal Merchant, p. 90), says that down to 1732 such quantities of silver went 
to China to fetch back gold that the price of gold in China rose and it became 
no longer profitable to send silver there. 

“’Ed. I reads “be the principal commodity.” “*Ed. i reads “chiefly.” 

2o8 the wealth of NATIONS 

those metals from one place to another both by sea and by land. 
In the greater part of the governments of Asia, besides, the almost 
universal custom of concealing treasures in the bowels of the earth, 
of which the knowledge frequently dies with the person who makes 
the concealment, must occasion the loss of a still greater quantity. 

The quantity of gold and silver imported at both Cadiz and Lis- 
bon (including not only what comes under register, but what may 
be supposed to be smuggled) amounts, according to the best ac- 
counts,’^"* to about six millions sterling a year. 

According to IMr. IMeggens the annual importation of the 
precious metals into Spain, at an average of six years: viz. from 
174S to 1753, both inclusive; and into Portugal, at an average of 
seven years; viz. from 1747 to 1753. both incliusive; amounted 
in silver to 1,101.107 pounds weight; and in gold to 40,940 pounds 
weight. The silver, at sixty-two shillings the pound Troy, amounts 
to 3.413.431/. 10^.’^” sterling. The gold, at forty-four guineas and a 
half the pound Troy, amounts to 2,333.446/. 14^. sterling. Both to- 
gether amount to 5,746,878/. 45. sterling. The account of what was 
imported under register, he assures us is exact. He gives us the de- 
tail of the particular places from which the gold and silver were 
brought, and of the particular quantity of each metal, which, ac- 
cording to the register, each of them afforded. He makes an allow- 
ance too for the quantity of each metal w’hich he supposes may 
have been smuggled. The great experience of this judicious mer- 
chant renders his opinion of considerable weight. 

According to the eloquent and, .sometimes, well-informed .\u- 

’“Thc samp words arc used below, p. 412. 

Postscript to the Universal Merchant, p. 15 and 16. This Postscript was 
not printed till 1756, three years after the publication of the l)Ook, which has 
never had a second edition. The postscript is, therefore, to he found in few 
copies: It corrects several errors in the book. This note appears first in ed. 2. 
The title of the work referred to is Farther Explanations of some particular 
subjects relating to Trade, Coin, and Exchanges, contained in the Universal 
Merchant, by N. M., 1756. On p. i N. M. claims the authorship of the book 
“published by Mr. Horsley under the too pompous titles of The Universal 
Merehant.” In the dedication of The Universal Merchant, 173 1, William 
Horsley, the editor, says the author ‘'thouirh an alien by birth is an Enslish- 
man by interest.” Sir James Steuart, who calls him “Mr. Mepens,” says he 
lii'cd long in England and wrote the Universal Merchant in German, from 
which it had been translated {Inquiry into the Principles of Political Econ- 
omy, 1767, vol. ii., pp. 158, 292) . The Gentleman’s Magazine for August, 1764, 
p. 398, contains in the obituary, under date August 18, 1764, “Nicolas Magens 
Esq. a merchant worth” 

“’The two periods are really five years, April, 1748, to April, 1753, and .six 
years, January, 1747, to January, 1753, but the averages are correct, being 
taken from Magens. 

''"The los. here should be 14s., and two lines lower down the 14s. should 
be los. 


thor of the Philosophical and Political History of the Establishment 
of the Europeans in the two Indies, the annual importation of regis- 
tered gold and silver into Spain, at an average of eleven years; viz. 
from J754 to 1764, both inclusive; amounted to 13,984,1855 
piastres of ten reals. On account of what may have been smuggled, 
however, the whole annual importation, he supposes, may have 
amounted to seventeen millions of piastres; which, at 4s. (id. the 
piastre, is equal to 3.825,000/. sterling. He gives the detail too of the 
particular places from which the gold and silver were brought, and 
of the particular ciuantities of each metal w'hich, according to the 
register, each of them afforded He informs us too, that if ve were 
to judge of the quantity of gold annually imported from the Bra- 
zils into Lisbon by the amount of the tax paid to the king of Port- 
ugal, which it seems is one-fifth of the standard metal, we might 
value it at eighteen millions of criizadoes, or forty-five millions of 
French livres. ccjual to about two millions sterling. On account of 
what may have been smuggled, however, we may safely, he says, 
add to this sum an eighth more, or 230,000/. sterling, so that the 
whole will amount to 2.250.000/. sterling.’’’’ .According to this ac- 
count. therefore, the whole annual importation of the precious met- 
als into both Spain and Portugal, amounts to about 6,075,000/. 

Several other very well authenticated, though manuscript,^''’’’ 
accounts, I have been assured, agree, in making this whole annual 
importation amount at an average to about six millions sterling; 
sometimes a little more, sometimes a little less. 

The annual importation of the precious metals into Cadiz and 
Lisbon, indeed, is not equal to the whole annual produce of the 
mines of .America. Some part is sent annually by the .Acapulco ships 
to Manilla; some part is employed in the contraband trade which 
the Spanish colonies carry on with those of other European na- 
tions ; and some part, no doubt, remains in the country. The mines 
of America, besides, are by no means the only gold and silver 
mines in the wo»ld. They are, however, by far the most abundant. 
The produce of all the othei mines which are known, is insignifi- 
cant. it is acknowledged, in comparison with theirs; and the far 
greater part of their produce, it is likewise acknowledged, is an- 
nually imported into Cadiz and Lisbon. But the consumption of 
Birmingham alone, at the rate of fifty thousand pounds a year,^®® 

^"Misprinted t3.q84,i8,i;§ in cd. 2 and Liter editions. 

’“Raynal, Histoire philosophique et politique des ftabU^semens et du com- 
merce des Eiiropeem dans les deux Indes, Amsterdam ed., 1773, tom. iii., p, 310, 
Raynal, Histoire philosophique, Amsterdam cd., 1773, tom. iii., p. 385. 

’•'■-Ed. I does not contain “though manuscript.’’ ’“Above, p. 207. 



is equal to the hundred-and-twentieth part of this annual importa- 
tion at the rate of six millions a year. The whole annual consump- 
tion of gold and silver, therefore, in all the different countries of 
the world where those metals are used, may perhaps be nearly 
equal to the whole annual produce. The remainder may be no more 
than sufficient to supply the increasing demand of all thriving 
countries. It may even have fallen so far short of this demand as 
somewhat to raise the price of those metals in the European 

The quantity of brass and iron annually brought from the mine 
to the market is out of all proportion greater than that of gold and 
silver. We do not, however, upon this account, imagine that those 
coarse metals are likely to multiply beyond the demand, or to be- 
come gradually cheaper and cheaper. Why should we imagine that 
the precious metals are likely to do so? The coarse metals, indeed, 
though harder, are put to much harder uses, and, as they are of less 
value, less care is employed in their preservation. The precious 
metals, however, are not necessarUy immortal any more than they, 
but are liable too to be lost, wasted, and consumed in a great variety 
of ways. 

The price of all metals, though liable to slow and gradual varia- 
tions, varies less from year to year than that of almost any other 
part of rude produce of land; and the price of the precious metals is 
even less liable to sudden variations than that of the coarse ones. 
The durableness of metals is the foundation of this extraordinary 
steadiness of price. The com w'hich was brought to market last year, 
will be all or almost all consumed long before the end of this year. 
But some part of the iron which was brought from the mine two or 
three hundred years ago, may be still in use, and perhaps some part 
of the gold which was brought from it two or three thousand years 
ago. The different masses of corn which in different years must sup- 
ply the consumption of the world, will always be nearly in propor- 
tion to the respective produce of those different years. But the pro- 
portion between the different masses of iron which may be in use 
in two different years, will be very little affected by any accidental 
difference in the produce of the iron mines of those two years ; and 
the proportion between the masses of gold will be still less affected 
by any such difference in the produce of the gold mines. Though 
the produce of the greater part of metallic mines, therefore, varies, 
perhaps, still more from year to year than that of the greater part 
of corn-fields, those variations have not the same effect upon the 
price of the one species of commodities, as upon that of the other. 



Variations in the Proportion between the respective Values of Gold 

and Silver 

Before the discovery of the mines of America, the value of fine 
gold to fine silver was regulated in the different mints of Europe, 
between the proportions of one to ten and one to twelve ; that is, an 
ounce of line gold was supposed to be worth from ten to twelve 
ounces of fine silver. About the middle of the last century it came 
to be regulated, between the proportions of one to fourteen and one 
to fifteen; that is, an ounce of fine gold came to be supposed worth 
between fourteen and fifteen ounces of fine silver. Gold rose in its 
nominal value, or in the quantity of silver which was given for it. 
Both metals sunk in their real value, or in the quantity of labour 
which they could purchase ; but silver sunk more Ibatj gold. Though 
both the gold and silver mines of America e.xceedcd in fertility all 
those which had ever been known before, the fertility of the silver 
mines had, it seems, been proportionably still greater than that of 
the gold ones. 

The great quantities of silver carried annually from Europe to 
India, have, in some of the English settlements, gradually reduced 
the value of that metal in proportion to gold. In the mint of Cal- 
cutta. an ounce of fine gold is supposed to be worth fifteen ounces 
of fine silver, in the same manner as in Europe. It is in the mint 
perhaps latoci too high for the value which it bears in the market 
of Bengal. In China, the proportion of gold to silver still continues 
as one to ten, or one to twelve.^® ‘ In Japan, it is said to be as one 
to eight.^”’^ 

The proportion between the quantities of gold and silver an- 
nually imported into Europe, according to Mr. Meggen’s account, 
is as one to twenty-two nearly; that is, for one ounce of gold 
there are imported a little more than twenty-two ounces of silver. 
The great quantity of silver sent annually to the East Indies, re- 
duces, he supposes, the quantities of those metals which remain in 
Europe to the proportion of one to fourteen or fifteen, the propor- 
tion of their values. The proportion between their values, he seems 
to think,^^' must necessarily be the same as that between their 

Ed. I does not contain “or one to twelve." 

’’“Cantillon gives one to ten for China and one to eight for Japan, Essai, p. 

’“Above, pp. 208, 2og. The exact figure given by Hagens, Farther Ex- 
planations, p. 16, is I to 22^. 

’"/hid., p. 17. 



quantities, and would therefore be as one to twenty-two, were it not 
for this greater exportation of silver. 

. But the ordinary proportion between the respective values of two 
commodities is not necessarily the same as that between the quanti- 
ties of them which are commonly in the market. The price of an 
ox, reckoned at ten guineas, is about threescore times the price of a 
lamb, reckoned at 35. td. It would be absurd, however, to infer from 
thence, that there are commonly in the market threescore lambs for 
one ox: and it would be just as absurd to infer, because an ounce of 
gold will commonly purchase from fourteen to fifteen ounces of sil - 
ver, that there are commonly in the market only fourteen or fifteen 
ounces of silver for one ounce of gold. 

The quantity of silver commonly in the market, it is probable, is 
much greater in proportion to that of gold, than the value of a cer- 
tain quantity of gold is to that of an equal quantity of silver. The 
whole quantity of a cheap commodity brought to market, is com- 
monly not only greater, but of greater value, than the whole quan- 
tity of a dear one. The whole quantity of bread annually brought 
to market, is not only greater, but of greater value than the whole 
quantity of butcher’s-meat'; the whole quantity of bulcher’s-meat, 
than the whole quantity of poultry; and the whole quantity of 
poultry, than the whole quantity of w’ild fowl. There are so many 
more purchases for the cheap than for the dear commodity, that, 
not only a greater quantity of it, but a greater value, can commonly 
be disposed of. The whole quantity, therefore, of the cheap com- 
modity must commonly be greater in proportion to the whole 
quantity of the dear one, than the value of a certain quantity of 
the dear one, is to the value of an equal quantity of the cheap one. 
When we compare the precious metals with one another, silver is a 
cheap, and gold a dear commodity. We ought naturally to expect, 
therefore, that there should always be in the market, not only a 
greater quantity, but a greater value of silver than of gold. Let any 
man, who has a little of both, compare his own silver with his gold 
plate, and he will probably find. that, not only the quantity, but 
the value of the former greatly exceeds that of the latter. IMany 
people, besides, have a good deal of silver who have no gold plate, 
which, even with those who have it, is generally confined to watch- 
cases, snuff-boxes, and such like trinkets, of which the whole 
amount is seldom of great value. In the British coin, indeed, the 
value of the gold preponderates greatly, but it is not so in that of 
all countries. In the coin of some countries the value of the two 
metals is nearly equal. In the Scotch coin, before the union with 
England, the gold preponderated very little, though it did some- 


what/'’’* as it appears by the accounts of the mint. In the coin of 
many countries the silver preponderates. In France, the largest 
sums are commonly paid in that metal, and it is there difficult to ‘ 
get more gold than what is necessary to carry about in your poc- 
ket. The superior value, however, of the silver plate above that of 
the gold, which lakes place in all countries, will much more than 
compensate the preponderancy of the gold coin above the silver, 
which takes place only in some countries. 

Though, in one sense of the word, silver always has been, and 
probably always will be, much cheaper than gold; yet in another 
sense, gold may. perhaps, in the present state of the Spanish 
market, be said to be somewhat cheaper than silver. A commodity 
may be said to be dear or cheap, not only according to the abso- 
lute greatness or .smallness of its usual price, but according as that 
price is more or less above the lowest for which it is po.ssible to 
bring it to market for any considerable time together. This lowest 
price is that which barely replaces, with a moderate profit, the 
stock which must be employed in bringing the commodity thither. 

It is the price which affords nothing to the landlord, of which rent 
makes not any component part, but which resolves itself altogether 
into wages and profit. But, in the present state of the Spanish 
market, gold is certainly somewhat nearer to this lowest price than 
silver. The ta.x of the King of Spain upon gold is only one-twen- 
tieth part of the standard metal, or five per cent.; whereas his Lax 
upon silver .imount.s to one-tenih part of it, or to ten per cent."*^ 

In these taxes too, it has already been observed,’*’'- consists the 
whole rent of the greater part of the gold and silver mines of Span- 
ish America; and that upon gold is still worse [laid than that upon 
silver. The profits of the undertakers of gold mines too, as they 
more rarely make a fortune, must, in general, be still more mod- 
erate than tli().se of the undertakers of silver mines.””' The price of 
Spanish gold, therefore, as it affords both less rent and profit, 
must, in the Spanish market, be somewhat nearer to the lowest 
price for which i^ is pos.sible to bring it thither, than the price of 

’'''Sec Ruddiman’.'s Prcf.ire to .Anderson’s Diplomata, &c, Scotia;, Seleclus 
diplomatum et numismatum thesaurus (quoted above, p. 183), pp. 84, 83 ; and 
in the translation, pp. 173, 176. Hut the statement that gold preponderated is 
founded merely on the fact that tlic value of the Rold coined in the periods 
i6th December, 1602, to igth July, 1606, and 20th Seplemlicr, 1611, to 14th 
April, 161,3, was greater than that of the silver coined in the same time, which 
proves nothing about the proportions in the whole stock of coin. The state- 
ment is repeated below, p. 281. The note appears first in ed. 2. 

““Ed. I reads “European.” ””Ed. i roads “European.” 

Ed. I reads “one fifth part of it, or to twenty per cent.” 

'“Above, pp. 168, 201. ’"“Above, p. 170. “‘Ed. i reads “European.” 


Spanish sflver. When all expences are computed, the whole quan- 
tity of the one metal, it would seem, cannot, in the Spanish mar- 
ket, be disposed of so advantageously as the whole quantity of the 
other.^®® The tax, indeed, of the King of Portugal upon the 
gold of the Brazils, is the same with the ancient tax of the King 
of Spain upon the silver of Mexico and Peru: or one-fifth part of 
the standard metal.®®® It may, therefore, be uncertain whether to 
the general market of Europe the whole mass of American gold 
comes at a price ®®® nearer to the lowest for which it is possible to 
bring it thither, than the -whole mass of American silvei;. 

The price of diamonds and other precious stones may, perhaps, 
be still nearer to the lowest price at which it is possible to bring 
them to market, than even the price of gold.®"" 

Though it is not very probable, that any part of a tax which is 
not only imposed upon one of the most proper subjects of taxation, 
a mere luxury and superfluity, but which affords so very important 
a revenue, as the tax upon silver, will ever bo given up as long as it 
is possible to pay it: yet the same impossibility of paying it, wliich 
in 1736 made it necessary to reduce it from one-fifth to one- 
tenth,®®® may in time make it necessary to reduce it still further: 
in the same manner as it made it necessary to reduce the tax upon 
gold to one-twentieth.®®^ That the silver mines of Spanish .\merica, 
like all other mines, become gradually more e\i!eii«h’e in the work- 

Ed. I places the “it would seem'’ after “computed," omili! "in the Span- 
ish market,” and puts the whole sentence at tlic end of tlic paragraph. 

Ed. I places the “indeed” here. *'’■ Ed. t reads “that.” 

Above, p. 209, 

Ed. 1 reads “It must still be true, however, that the whole mass of Am- 
erican sold comes to the European market at a price.” 

Ed. I contains another paragraph, "Were the king of Spain to give up his 
tax upon silver, the price of that metal might not, upon that account, sink im- 
mediately in the European market. As Iona as the quantity brought thither 
continued the same as before, it would still continue to sell at the s.ime pi ice. 
The first and immediate effect of this change, would be to increase the profits 
of mining, the undertaker of the mine now gaining all that he ha'l been used 
to pay to the king. These great profits would soon tempt a greater number of 
people to undertake the working of new mines. Many mini's wnukl be wi ought 
ivhich cannot be wrought at present, because they cannot afford to pay this 
tax, and the quantity of silver lirought to market would, i.i a few ycars'bc so 
much augmented, probably, as to sink its price about one-fifth below its 
present standard. This diminution in the value of silver would again reduce 
the profits of mining nearly to their present rate." 

'“Above, pp. 169, 202. 

Ed. I reads from the beginning of the paragraph, "It is not indeed very 
probable, that any part of a tax which affords so important a revenue, and 
which is imposed, too, upon one of the most proper subjects of taxation, will 
ever be given up as long as it is possible to pay it. The impossibility of paying 
It, however, may in time make it necessary to diminish it, in the same manner 
as it made it necessary to diminish the tax upon gold.” 


ing, on account of the greater depths at which it is necessary to 
carry on the works, and of the greater expence of drawing out the 
water and of supplying them with fresh air at those depths, is ac- 
knowledged by everj' body who has enquired into the state of those 

These causes, which are equivalent to a growing scarcity of sil- 
ver (,for a commodity may be said to grow scarcer when it becomes 
more difficult and expensive to collect a certain quantity of it), 
must, in time, produce one or other of the three following events. 

, The increase of the expence must either, first, be compensated al- 
together by a propor* ioiiable increase in the price of the metal ; or, 
secondly, it must be compensated altogether by a proportionable 
diminution of the ta\ upon silver; or, thirdly, it must be compen- 
sated partly by the one, and partly by the other of those tw’o ex- 
pedients. This thitd event is very nos.sible. .^s gold rose in its price 
in proportion to silver, notwithstanding a great diminution of the 
tax upon gold ; so silver might rise in its price in proportion to la- 
bour and commodities, notwithstanding an equal diminution of the 
tax upon silver. 

Such successive reductions of the tax, however, though they may 
not prevent altogether, must certainly retard, more or less, the rise 
of the value of silver in the European market. In consequence of 
such reductions, many mines may be wrought which could not be 
wrought before. bcc;!u.-.e they could not afford to pay the old tax; 
and the quantity of silver annually brought to market must always 
be somew’hat greater, and, therefore, the value of any given quan- 
tit)' somewhat, than it otherwise Avould have been. Tn conse- 
quence of the reduction in 1736, the value of silver in the Euro- 
pean market, though it may not at this day be lower than before 
that reduction, is, probably, at least ten per cent, lower than it 
would have been, had the Court of Spain continued to exact the old 

That, notwithstanding this reduction, the value of silver has, 
during the course of the present century, begun to rise somewhat in 
the European market, the facts and arguments which have been al- 
leged above, dispose me to believe, or more properly to suspect and 
conjecture; for the best opinion which I can form upon this subject 
scarce, perhaps, deserves the name of belief. The rise, indeed, sup- 
posing there has been any, has hitherto been so very small, that 

This paragraph appears first in ed. 2. 

”* Ed. 1 reads from the beginning of the paragraph, “That the first of these 
three events has already begun to lake place, or that silver has, during the 
course of the present century, begun to rise somewhat in its value in the Eu- 

The an- 
nual con- 
must at 
ecjual the 

and will 
then ac- 
Jatc itself 
to chang- 
es in the 

Gold and 
silver arc 
to be still 
falling be- 
cause they 
are in- 
and some 
sorts of 
'ude pro- 

216 the wealth of nations 

after all that has been said, it may, perhaps, appear to many peo- 
ple uncertain, not only whether this event has actually taken place; 
but whether the contrary may not have taken place, or whether the 
value of silver may not still continue to fall in the European market. 

It must be observed, however, that whatever may be the supposed 
annual importation of gold and silver, there must be a certain 
period, at which the annual consumption of those metals will be 
equal to that annual importatiem. Their consumption must increase 
as their mass increases, or rather in a much greater proportion. .As 
their mass increases, their value diminishes. They are more used, 
and less cared for, and their consumption consequently increases in 
a greater proportion than their mass. After a certain period, there- 
fore, the annual consumption of those metals must, in this manner, 
become equal to their annual importation, provided that importa- 
tion is not continually increasing; which, in the present times, is 
not supposed to be the case. 

If, when the annual consumption has become equal to the annual 
importation, the annual importation should gradually diminish, the 
annual consumption may, for some time, exceed the annual im- 
portation. The mass of those metals may gradually and insensibly 
diminish, and their value gradually and insensibly rise, till the an- 
nual importation becoming again stationary, the annual consump- 
tion will gradually and insensibly accommodate itself to what that 
annual importation can maintain.^^’’ 

Grounds of the Suspicion that the Value of Silver still continues to 


The increase of the wealth of Europe, and the popular notion that, 
as the quantity of the precious metals naturally increases with the 
increase of wealth, so their value diminishes as their quantity in- 
creases, may, perhaps,’™ dispose many people to believe that their 
value still continues to fall in the European market: and the still 
gradually increasing price of many parts of the rude produce of 
land may ’’’ confirm them still further in this opinion. 

That that increase in the quantity of the precious metals, 
which arises in any country from the increase of wealth, has no 

ropcan market, the facts and arguments which have been alledged above dis- 
pose me to believe. The rise, indeed, has hitherto.” 

' "The last two paragraphs appear first in Additions and Corrections and 

Ed. r reads “may besides.” ™ 
Ed. r reads “That the increase of.” 
Ed. I places the “which arises” here. 

Ed. I reads “perhaps” here. 


tendency to diminish their value, I have endeavoured to show al- Juj-e ate 
ready.’^'’ Gold and silver naturally resort to a rich country, for the 
same reason that all sorts of luxuries and curiosities resort to it; jt|,asal 
not because they are cheaper there than in poorer countries, but ready 
because they are dearer, or because a better price is given for them, been 
It is the superiority of price which attracts them, and as soon as 
that superiority ceases, they necessarily cease to go thither. increase of 

If you except corn and such other vegetables as are raised alto- 
gether by human indiistri’. that all other sorts of rude produce, cat- 
tie, poultry, game of all kinds, the useful fossils and minerals of the their 
earth, &c. naturally grow dearer as the society advances in wealth 
and improvement, I have endeavoured to show already.*®^ Though 
such commodities, therefore, come to exchange for a greater quan- rise of 
tity of silver than before, it will not from thence follow that silver cattle, 
has become really cheaper, or will purchase less labour than before, ^ 

but that such commodities have become really dearer, or will pur- rise in 
chase more labour than before. It is not their nominal price only, 
but their real price which rises in the progress of improvement. The to'^faT 
rise of their nominal price is the effect, not of any degradation of of silver, 
the value of silver, but of the rise in their real price. 

Dijjerent Ejects oj the Progress of Improvement upon three di§er- 
‘ ent Sorts of rude Produce 

These different sorts of rude produce may be divided into three The real 
classes. The first comprehends those which it is scarce in the power 
of human industry to multiply at all. The second, those which it can sorts of 
multiply in proportion to the demand. The third, those in which 
the efficacy of industry is either limited or uncertain. In the prog- the 
ress of wealth and improvement, the real price of the first may rise progress 
to any degree of extravagance, and seems not to be limited by any 
certain boundary, .That of the .second, though it may rise greatly, ment; 
has, however, a certain boundary beyond which it cannot well pass 
for any considerable time together. That of the third, though its 
natural tendency is to rise in the progress of improvement, yet in 
the same degree of improvement it may sometimes happen even to 
fall, sometimes to continue the same, and sometimes to rise more or 
less, according as different accidents render the efforts of human 
industry, in multiplying this sort of rude produce, more or less suc- 

Above, p. i88 ff 

“'Above, pp. 174-176. 



(i) The 
cannot be 
by human 
such as 

First Sort 

The first sort of rude produce of which the price rises in the prog- 
ress of improvement, is that which it is scarce in the power of hu- 
man industry to multiply at all. It consists in those things which 
nature produces only in certain quantities, and which being of a 
very perishable nature, it is impossible to accumulate together the 
produce of many difierent seasons. Such are the greater part of 
rare and singular birds and fishes, many different sorts of game, al- 
most all wild-fowl, all birds of passage in particular, as well as many 
other things. When wealth and the luxury which accompanies it 
increase, the demand for these is likely to increase with them, and 
no effort of human industry may be able to increase the supply 
much beyond what it was before this increase of the demand. The 
quantity of such commodities, therefore, remaining the same, or 
nearly the same, while the competition to purchase them is con- 
tinually increasing, their price may rise to any degree of extrava- 
gance, and seems not to be limited by any certain boundary. If 
woodcocks should become so fashionable as to sell for twenty guin- 
eas a-piece, no effort of human industry could increase the number 
of those brought to market, much beyond what it is at present. The 
high price paid by the Romans, in the time of their greatest grand- 
eur, for rare birds and fishes, may in this manner easily be ac- 
counted for. These prices were not the effects of the low value of 
silver in those times, but of the high value of such rarities and 
curiosities as human industry could not multiply at pleasure. The 
real value of silver was higher at Rome, for some time before and 
after the fall of the republic, than it is through the greater part of 
Europe at present. Three sestertii, equal to about sixpence sterling, 
was the price which the republic paid for the modius or peck of the 
tithe wheat of Sicily. This price, however, was probably below the 
average market price, the obligation to deliver their wheat at this 
rate being considered as a tax upon the Sicilian farmers. When the 
Romans, therefore, had occasion to order more corn than the tithe 
of wheat amounted to, they were bound by capitulation to pay for 
the surplus at the rate of four sestertii, or eight-pence sterling, the 
peck; and this had probably been reckoned the moderate and 
reasonable, that is, the ordinary or average contract price of those 
times; it is equal to about one-and-twenty shillings the quarter. 
Eight-and-twenty shillings the quarter was, before the late years of 

.\s mentioned above, p. 150. Cicero, In Verr., Act. II., lib. Ui., c. 70, is the 



scarcity, the ordinaiy contract price of English wheat, which in 
quality is inferior to the Sicilian, and generally sells for a lower 
price in the European market. The value of silver, therefore, in 
those ancient times, must have been to its value in the present, as 
three to four inversely; that is, three ounces of silver w'ould then 
have purchased tlie same quantity of labour and commodities which 
four ounces will do at present. I^Tien we read in Pliny, therefore, 
that Seius bought a white nightingale, as a present for the em- 
press Agrippina, at the price of six thousand sestertii, equal to about 
fifty pounds of our present money; and that Asinius Celer pur- 
chased a surmullet at the price of eight thousand sestertii, equal to 
about sixty-six pounds thirteen shillings and four-pence of cur pres- 
ent money; the extravagance of those prices, how much soever it 
may surprise us, is apt, notwithstanding, to appear to us about one- 
third less than it really was. Their real price, the quantity of labour 
and subsistence which was given away for them, was about one- 
third more than their nominal price is apt to express to ns in the 
present times. Seius gave for the nightingale the command of a 
quantity of labour and subsistence equal to what 66/. 13^. 4c/. 
would purchase in the present times; and Asinius Celer gave for 
the surmullet the command of a quantity equal to what 88/. 17J. 
gd.}, would purchase, What occasioned the extravagance of 
those high prices was, not so much the abundance of silver, as the 
abundance of labour and subsistence, of which those Romans had 
the disposal, beyond what was neces.sary for their own use. The 
quantity of silver, of which they had the disposal, was a good deal 
less than what the command of the same quantity of labour and sub- 
sistence would have procured to them in the present times. 

Second Sort 

The second sort of rude produce of which the price rises in the 
progress of improvement, is that which human industry can multi- 
ply in proportionate the demand. It consists in those useful plants 
and animals, which, in uncultivated countries, nature produces with 
such profuse abundance, that they are of little or no value, and 
which, as cultivation advances, are therefore forced to give place to 
some more profitable produce. During a long period in the progress 
of improvement, the quantity of these is continually diminishing, 
while at the same time the demand for them is continually increas- 

*“Lib. X, c. 2g. “Sdo sestertiis sa candidam alioquin, quod est prope in- 
usitatum, venisse, quae Agrippinac Claudii principis conjugi dono daretur.” 
“Seius” seems to be the result of misreadirg “Scio.” 

"“Lib. ix. c. 17. This and the previous note appear first in ed. j. 

(2} The 

which call, 
be multi- 
plied at 
will, e.g. 


When it 
to culti- 
vate land 
to yield 
food for 
cattle, the 
price of 
cattle can- 
not go 


ing. Their real value, therefore, the real quantity of labour which 
they will purchase or command, gradually rises, till at last it gets 
so high as to render them as profitable a produce as any thing else 
which human industry can raise upon the most fertile and best cul- 
tivated land. When it has got so high it cannot well go higher. If it 
did, more land and more industry would soon be employed to in- 
crease their quantity. 

When the price of cattle, for example, rises so high that it is as 
profitable to cultivate land in order to raise food for them, as in or- 
der to raise food for man, it cannot well go higher. If it did, more 
corn land would soon be turned into pasture. The extension of till- 
age, by diminishing the quantity of wild pasture, diminishes the 
quantity of butcher’s-meat which the country naturally produces 
without labour or cultivation, and by increasing the number of 
those who have either corn, or, what comes to the same thing, the 
price of corn, to give in exchange for it, increases the demand. The 
price of butcher’s-meat, therefore, and consequently of cattle, must 
gradually rise till it gets so high, that it becomes as profitable to 
employ the most fertile and best cultivated lands in rai.'ing food for 
them as in raising corn. But it must always be late in the progress of 
improvement before tillage can be so far extended as to raise the 
price of cattle to this height; and till it has got to this height, if the 
country is advancing at all, their price must be ci>ntinually rising. 
There are. perhaps, some parts of Europe in which the price of cat- 
tle has not yet got to this height. It had not got to this height in any 
part of Scotland before the union.’’'’’ Had the Scotch cattle been al- 
ways confined to the market of Scotland, in a country in which the 
quantity of land, which can be applied to no other purpose but the 
feeding of cattle, is so great in proportion to what can be applied to 
other purposes, it is scarce possible, perhaps, that their price could 
ever have risen so high as to render it profitable to cultivate land 
for the sake of feeding them. In England, the price of cattle, it has 
already been observed,'"® seems, in the neighbourhood of London, 
to have got to this height about the beginning of. the last century; 
but it was much later probably before it got to it through the greater 
part of the remoter counties; in some of which, perhaps, it may 
scarce yet have got to it. Of all the different substances, however, 
which compose this second sort of rude produce, cattle is, perhaps, 
that of which the price, in the progress of improvement, first rises 
to this height. 

Till the price of cattle, indeed, has got to this height, it seems 
scarce possible that the greater part, even of those lands which are 

Above, pp. 149, 162. Above, p. iji, and cp. below, p. 225. 

It must go 
to this 


capable of the highest cultivation, can be completely cultivated. In height in 
all farms too distant from any town to carry manure from it, that 

is, in the far greater part of those of every extensive country, the complet& 
quantity of well-cultivated land must be in proportion to the quan- ryhiva- 
tity of manure which the farm itself produces ; and this again must 

be in proportion to the stock of cattle which are maintained upon 

it. The land is manu'-ed either by pasturing the cattle upon it, or 
by feeding them in the stable, and from thence carrying out their 
dung to it. But unless the price of the cattle be sufficient to pay 
both the rent and profit of cultivated land, the farmer cannot afford 
to pasture them upon it; and he can still less afford to feed them in 
the stable. It is with the produce of improved and cultivated land 
only, that cattle can be fed in tlie stable; because to collect the 
scanty and scattered produce of w’aste and unimproved lands would 
require too much labour and be too expensive. If the price of the 
cattle, therefore, is not sufficient to pay for the produce of im- 
proi'ed and cultivated land, when they are allowed to pasture it, 
that price will be still less sufficient to pay for that produce when 
it must be collected with a good deal of additional labour, and 
brought into the stable to them. In these circumstances, therefore, 
no more cattle can, with profit, be fed in the stable than what are 
necessary for tillage. But these can never afford manure enough for 
keeping constantly in good condition, all the lands which they are 
capable of cultivating. What they afford being insufficient for the 
whole farm, will naturally be reserved for the lands to which it can 
be most advantageously or conveniemly applied: the most fertile, 
or those, perhaps, in the neighbourhood of the farm-yard. These, 
therefore, will be kept constantly in good condition and fit for till- 
age. The rest will, the greater part of them, be allowed to lie waste, 
producing scarce any thing but some miserable pasture, just suffi- 
cient to keep alive a few straggling, half-starved cattle: the farm, 
though much understocked in proportion to what would be neces- 
sary for its complete cu'tivation, being very frequently overstocked 
in proportion to its actual produce. A portion of this w'aste land, 
however, after having been pastured in this wretched manner for 
six or seven years together, may be ploughed up, when it will yield, 
perhaps, a poor crop or two of bad oats, or of some other coarse 
grain, and then, being entirely exhausted, it must be rested and 
pastured agam as before, and another portion ploughed up to be 
in the same manner exhausted and rested again in its turn. Such ac- 
cordingly was the general system of management all over the low 
country of Scotland before the union. The lands which were kept 
constantly well manured and in good condition, seldom exceeded a 

new colo- 
nies are 


third or a fourth part of the whole farm, and sometimes did not 
amount to a fifth or a sixth part of it. The rest were never manured, 
but a certain portion of them was in its turn, notwithstanding, regu- 
larly cultivated and exhausted. Under this system of management, 
it is evident, even that part of the lands of Scotland which is cap- 
able of good cultivation, could produce but little in comparison of 
what it may be capable of producing. But bow disadvantageous so- 
ever this system may appear, yet before the union the low price of 
cattle seems to have rendered it almost unavoidable. If, notwith- 
standing a great rise in their price, it still continues to prevail 
through a considerable part of the country, it is owing, in many 
places, no doubt, to ignorance and attachment to old customs, but 
in most places to the unavoidable obstructions which the natural 
course of things opposes to the immediate or speedy establishment 
of a better system; first, to the jx)verty of the tenants, to their not 
having yet had time to acquire a stock of cattle sufficient to culti- 
vate their lands more completely, the same rise of price which 
would render it advantageous for them to maintain a greater stock, 
rendering it more difficult for them to acquire it; and, secondly, to 
their not having yet had time to put their lands in condition to 
maintain this greater stock properly, supposing they were capable 
of acquiring it. The increase of stock and the improvement of land 
are two events which must go hand in hand, and of which the one 
can no-where much out-run the other. Without some increase of 
stock, there can be scarce any improvement of land, but there can 
be no considerable increase of stock but in consequence of a con- 
siderable improvement of land; otherwise the land could 
not maintain it. These natural obstructions to the establishment of 
a better system, cannot be removed but by a long course of fru- 
gality and industry; and half a century or a century more, perhaps, 
must pass away before the old system, which is wearing out gradu- 
ally, can be completely abolished through all the different parts 
of the country. Of all the commercial’''’ advantages, however, 
which Scotland has derived from the union with England, this rise 
in the price of cattle is, perhaps, the greatest. It has not only 
raised the value of all highland estates, but it h:is, perhaps, been 
the principal cause of the improvement of the low country. 

In all new colonies the great quantity of waste land, which can 
for many years be applied to no other purpose but the feeding of 
cattle, soon renders them extremely abundant, and in every thing 
great cheapness is the necessary consequence of great abundance. 
Though all the cattle of the European colonies in America were 

Eds. 1-3 read “of all commercial.” 


originally carried from Eutope, they soon multiplied so much there, 
and became of so little value, that even horses were allowed to run 
wild in the w'oods without any owner thinking it worth while to 
claim them. It must be a long time after the first establishment of 
such colonies, before it can become profitable to feed cattle upon 
the produce of cultivated land. The same causes, therefore, the 
want of manure, and the disproportion between the stock employed 
in cultivation, and the land which it is destined to cultivate, are 
likely to introduce there a system of husbandry not unlike that 
which still continues to take place in so many parts of Scotland. 
Mr. Kalm, the Swedish traveller, when he gives an account of the 
husbandry of some of the English colonies in North America, as he 
found it in 1749, observes, accordingly, that he can with difficulty 
discover there the character of the English nation, so well skilled in 
all the different branches of agriculture. They make scarce any 
manure for their corn fields, he says; but when one piece of ground 
has been exhausted by continual cropping, they clear and cultivate 
another piece of fresh land; and when that is exhausted, proceed to 
a third. Their cattle are allowed to wander through the woods and 
other uncultivated grounds, where they are half-starved; having 
long ago extirpated almost all the annud grasses by cropping them 
too early in the spring, before they had time to form their flowers, 
or to shed their seeds.^*® The annual grasses were, it seems, the best 
natural grasses in that part of North America; and when the Euro- 
peans first settled there, they used to grow very thick, and to rise 
three or four feet high. A piece of ground which, when he wrote, 
could not maintain one cow, would in former times, he was assured, 
have maintained four, each of which would have given four times 
the quantity of milk which that one was capable of giving. The 
poorness of the pasture had, in his opinion, occasioned the degrada- 
tion of their cattle, which degenerated sensibly from one generation 
to another. They were probably not unlike that stunted breed 
which was common all over Scotland thirty or forty years ago, and 
which is now so much mended through the greater part of the low 
country, not so much by a change of the breed, though that exped- 
ient has been employed in some places, as by a more plentiful meth- 
od of feeding them. 

Kalm’s Travels, vol. i. p. 343, 344. Travels into North America, contain- 
ing its natural history and a circumstantial account oj its Plantations and Ag- 
riculture in general, with the civil, ecclesiastical and commercial state of the 
country, the manners of the inhabitants and several curious and important re- 
marks on various subjects, by Peter Kalm, Professor of CEconomy in the Uni- 
versity of Aobo, in Swedish Finland, and member of the S. Royal Academy of 
Sciences. Translated by John Reinhold Forster, FA.S., 3 vols. 1770. The 
note appears first in ed. 2. 



Cattle are 
the first of 
oncl sort 
jf rude 
to bring 
in the 
price ne- 
cessary to 
secure cul- 

and veni- 
son is the 

things are 

such as 


Though it is late, therefore, in the progress of improvement be- 
fore cattle can bring such a price as to render it profitable to culti- 
vate land for the sake of feeding them; yet of all the different parts 
which compose this second sort of rude produce, they are perhaps 
the first which bring this price; because till they bring it, if seems 
impossible that improvement can be brought near even to that de- 
gree of perfection to which it has arrived in many parts of Europe. 

As cattle are among the first, so perhaps venison is among the 
last parts of this sort of rude produce which bring this price. The 
price of venison in Great Britain, how extravagant soever it may 
appear, is not near sufficient to compensate the expence of a deer 
park, as is well known to all those who have had any experience in 
the feeding of deer. If it was otherwise, the feeding of deer would 
soon become an article of common farming; in the same manner as 
the feeding of those small birds called Turdi was among the ancient 
Romans. Varro and Columella assure us that it was a most profit- 
able article.2’’2 The fattening of ortolans, birds of passage which ar- 
rive lean in the country, is said to be so in some parts of France. If 
venison continues in fashion, and the wealth and luxury of Great 
Britain increase as they have done for some time past, its price may 
very probably rise still higher than it is at present. 

Between that period in the progress of improvement which 
brings to its height the price of so necessary an article as cattle, and 
that which brings to it the price of such a superfluity as venison, 
there is a very long interval, in the course of which many other 
sorts of rude produce gradually arrive at their highest price, some 
sooner and some later, according to different circumstances. 

Thus in every farm the offals of the barn and stables will main- 
tain a certain number of poultry. These, as they are fed with what 
would otherwise be lost, are a mere save-all; and as they cost the 
farmer scarce any thing, so he can afford to sell them for very little, 
Almost all that he gets is pure gain, and their price can scarce be so 
low as to discourage him from feeding this number. But in coun- 
tries ill cultivated, and, therefore, but thinly inhabited, the poultry, 
which are thus rai.sed without expence, are often fully sufficient to 
supply the whole demand. In this state of things, therefore, they 
are often as cheap as butcher’s-meat, or any other sort of animal 
food. But the whole quantity of poultry, which the farm in this 
manner produces without expence, must always be much smaller 
than the whole quantity of butcher’s-meat which is reared upon it ; 
and in times of wealth and luxury what is rare, with only nearly 

“ Varro, De re ritslica, iii, 2, and Columella, De re rustics, viii., 10, ad fin,, 
where Varro is quoted. 


equal merit, is always preferred to what is common. As wealth and 
luxury increase, therefore, in consequence of improvement and cul- 
tivation, the price of poultry gradually rises above that of butch- 
er’s-meat, till at last it gets so high that it becomes profitable to cul- 
tivate land for the sake of feeding them. When it has got to this 
height, it cannot well go higher. If it did. more land would soon be 
turned to this purpose. In several provinces of France, the feeding 
of poultry is considered as a very important article in rural oecon- 
omy, and sufficiently profitable to encourage the farmer to raise a 
considerable quantity of Indian corn and buck-wheat for this pur- 
pose. A middling farmer will there .sometimes have four hundred 
fowls in his yard. The feeding of poultry seems scarce yet to be gen- 
erally considered as a matter of so much importance in England. 

They are certainly, however, dearer in England than in France, as 
England receives considerable supplies from France. In the prog- 
ress of improvement, the period at which every particular sort of 
animal food is dearest, must naturally be that which immediately 
precedes the general practice of cultivating land for the sake of 
raising it. For some time before this practice becomes general, the 
scarcity must necessarily raise the price. After it has become gen- 
eral. new methods of feeding are commonly fallen upon, which en- 
able the farmer to raise upon the same quantity of ground a much 
greater quantity of that particular sort of animal food. The plenty 
not only obliges him to sell cheaper, but in consequence of these 
improvements he can afford to sell cheaper; for if he could not af- 
ford it, the plenty would not be of long continuance. It has been 
probably in this manner that the introduction of clover, turnips, 
carrots, cabbages, &c. has contributed to sink the common price of 
butcher ’s-meat in the London market somewhat below what it was 
about the beginning of the last centurj'. 

The hog, that finds his food among ordure, and greedily devours hogs, 
many things rejected by every other useful animal, is. like poultry, 
originally kept as a save-all. As long as the number of such animals, 
which can thus be Teared at little or no expence, is fully sufficient to 
supply the demand, this sort of butcher’s-meat comes to market at 
a much lower price than any other. But when the demand rises be- 
yond what this quantity can supply, when it becomes necessary to 
raise food on purpose for feeding and fattening hogs, in the same 
manner as for feeding and fattening other cattle, the price neces- 
sarily rises, and becomes proportionably either higher or lower than 
that of other butcher’s-meat, according as the nature of the coun- 
try, and the state of its agriculture, happen to render the feeding 
of hogs more or less expensive than that of other cattle. In France, 

mill:, but- 
ler and 


according to Mr. Buffon, the price of pork is nearly equal to that of 
beef.i®“ In most parts of Great Britain it is at present somewhat 

The great rise in the price both of hogs and poultry has in Great 
Britain been frequently imputed to the diminution of the number 
of cottagers and other small occupiers of land; an event which has 
in every part of Europe been the immediate forerunner of improve- 
ment and better cultivation, but which at the same time may have 
contributed to raise the price of those articles, both somewhat soon- 
er and somewhat faster than it would otherwise have risen. As the 
poorest family can often maintain a cat or a dog, without any ex- 
pence, so the poorest occupiers of land can commonly maintain a 
few poultry, or a sow and a few pigs, at very little. The little offals 
of their own table, their whey, skimmed milk and butter-milk, sup- 
ply those animals with a part of their food, and they find the rest 
in the neighbouring fields without doing any sensible damage to 
any body. By diminishing the number of those small occupiers, 
therefore, the quantity of this sort of provisions which is thus pro- 
duced at little or no expence, must certainly have been a good deal 
diminished, and their price must consequently have been raised 
both sooner and faster than it would otherwise have risen. Sooner 
or later, however, in the progress of improvement, it must at any 
rate have risen to the utmost height to which it is capable of rising; 
or to the price which pays the labour and expence of cultivating the 
land which furnishes them with food as well as these are paid upon 
the greater part of other cultivated land. 

The business of the dairy, like the feeding of hogs and poultry, is 
originally carried on as a save-all. The cattle necessarily kept upon 
the farm, produce more milk than either the rearing of their own 
young, or the consumption of the farmer’s family requires; and 
they produce most at one particular season. But of all the produc- 
tions of land, milk is perhaps the most perishable. In the warm sea- 
son, when it is most abundant, it will scarce keep four-and-twenty 
hours. The farmer, by making it into fresh butter, stores a small 
part of it for a week: by making it into salt butter, for a year: and 
by making it into cheese, he stores a much greater part of it for sev- 
eral years. Part of all these is reserved for the use of his own family. 
The rest goes to market, in order to find the best price which is to 
be had, and which can scarce be so low as to discourage him from 
sending thither whatever is over and above the use of his own fam- 
ily. If it is very low, indeed, he will be likely to manage his dairy in 
a very slovenly and dirty manner, and will scarce perhaps think it 

’^Histoire NafiireUe, vol. v. (i 7 SS)i P- 122. 


worth while to have a part inilar room or building on purpose for it, 
but will suffer the business to be carried on amidst the smoke, filth, 
and nastiness of his own kitchen; as was the case of almost all the 
farmers dairies in Scotland thirty or forty years ago, and as is the 
case of many of them still. The same causes which gradually raise 
the price of butcher’s-meat, the increase of the demand, and, in 
consequence of the improvement of the country, the diminution of 
the quantity which can be fed at little or no expence, raise, in the 
same manner, that of the produce of the dairy, of which the price 
naturally connects with that of butcher’s-meat, or with the expence 
of feeding cattle. The increase of price pays for more labour, care, 
and cleanliness. The dairy becomes more worthy of the farmer's at- 
tention, and the quality of its produce gradually improves. The 
price at last gets so high that it becomes worth while to employ 
some of the most fertile and best cultivated lands in feeding cattle 
merely for the purpose of the dairy; and when it has got to this 
height, it cannot well go higher. If it did, more land w’ould soon be 
turned to this purpose. It seems to have got to this height through 
the greater part of England, where much good land is commonly 
employed in this manner. If j'oii e-veept the neighbourhood of a few 
considerable towns, it seems not yet to have got to this height any- 
where in Scotland, where common farmers seldom employ much 
good land in raising food for cattle merely for the purpose of the 
dairy. The price of the produce, though it has risen very consider- 
ably within these few years, is probably still too low to admit of it. 
The inferiority of the quality, indeed, compared with that of the 
produce of English dairies, is fully equal to that of the price. But 
this inferiority of quality is, perhaps, rather the effect of this low- 
ness of price than the cause of it. Though the quality was much 
better, the greater part of what is brought to market could not, I 
apprehend, iij the present circumstances of the country, be disposed 
of at a much better price; and the present price, it is probable, 
would not pay the expence of the land and labour necessary for pro- 
ducing a much better quality. Through the greater part of England, 
notwithstanding the superiority of price, the dairy is not reckoned 
a more profitable employment of land than the raising of corn, or 
the fattening of cattle, the two great objects of agriculture. 
Through the greater part of Scotland, therefore, it cannot yet be 
even so profitable. 

The lands of no country, it is evident, can ever be completely cul- 
tivated and improved, till once the price of every produce, which 
human mdustry is obliged to raise upon them, has got so high as to 
pay for the expence of complete improvement and cultivation. In 

The rise 
of price, 
being ne- 
for good 



should be 
ri'i'arded ' 
with satis- 

ft is due 
not to a 
fall of sil- 
ver but to 
a rise in 
the real 
price of 
the pro- 

(]) The 
••ort in rc- 
(?ard to 
which the 
efficacy of 
ii limited 
or uncer- 

f. J.wool 
and hides, 
which are 
dages to 

2=8 t;he wealth of nations 

order to do this, the price of each particular produce must be suf- 
ficient, first, to pay the rent of good corn land, as it is that which 
regulates the rent of the greater part of other cultivated land; and 
secondly, to pay the labour and expence of the farmer as well as 
they arc commonly paid upon good corn-land; or, in other words, 
to replace with the ordinary profits the stock which he employs 
about it. This rise in the price of each particular produce, must evi- 
dently be previous to the improvenicnt and cultivation of the land 
which is destined for raising it. Gain is the end of all improvement, 
and nothing could deserve that name of which loss was to be the 
nece.ssary consequence. But loss must be the necessary conseqiiencf 
of improving land for the .sake of a produce of which the price cnulf. 
never bring back the exjjence. If the complete improvement and 
cultivation of the country be, as it most certainly is, the greatest of 
all public advantages, this rise in the price of idl those differeni 
sorts of rude produce, instead of being considered as a public ca- 
lamity, ought to be regarded as the necessary forerunner and at- 
tendant of the greatest of all public advantages. 

This rise too in the nominal or money-price of all those different 
sorts of rude produce has been the effect, not of any degradation in 
the value of silver, but of a rise in Uieir real price. They have l)C- 
come worth, not only a greater quantity of silver, but a greater 
quantity of labour and suksistence than before. As it costs a greater 
quantity of labour and subsistence to bring them to market, so 
when they are brought thither, they represent or are equivalent to a 
greater quantity. 

Third Sort 

The third and last sort of rude produce, of which the price nat- 
urally rises in the of improvement, is that in which the ef- 
ficacy of human industry, in augmenting the quantity, is eitlii'r 
limited or uncertain. Though the real j)rice of this sort of rude 
produce, therefore, naturally tends to rise in tl\c progress of im- 
provement, yet, according as different accidents happen to render 
the efforts of human industry more or less successful in augmenting 
the quantity, it may happen sometimes even to fall, sometimes to 
continue the same in very different periods of improvement, and 
sometimes to rise more or less in the same period. 

There are some sorts of rude produce which nature has rendered 
a kind of appendages to other sorts; so that the quantity of the one 
which any country can .afford, is necessarily limited by that of the 
other. The quantity of wool or of raw hides, for example, which any 


country can afford, is necessarily limited by the number of great 
and small cattle that are kept in it. The state of its improvement, 
and the nature of its agriculture, again necessarily determine this 

The same causes, which, in the progress of impro\’enient, grad- 
ually raise the price of butcher 's-meat. should have the same effect, 
it may be thought, upon the prices of wool and raw hides, and raise 
them too nearly in the same proportion. It probably would be so, 
if in the rude beginnings of improvement the market for the latter 
commodities was confined within as narrow bounds as that for the 
former. But the extent of their respective markets is commonly ex- 
tremely different. 

The market for butcher’s-meat is almost every-’vhere confined to 
the country which produces it. Ireland, and some part of British 
-VmeriLa indeed, carry on a considerable trade in salt provLsions; 
but they aie, I believe, the onl}' countries in the commercial world 
which do so, or which e.xport to other countries any considerable 
pan of their butcher's-meat. 

The market for wool and raw hides, on the contrary, is in the 
rude beginnings of improvement very seldom confined to the coun- 
try which produce.^ them. They can easily be transported to distant 
countries, wool without any preparation, and raw hides with very 
little; and as they are the materials of many manufactures, the in- 
dustry of other countries may occasion a demand for them, though 
that of the country which produces them might not occasion any. 

In countries ill cultivated, and therefore but thinly inhabited, the 
price of the wool and the hide bears always a much greater propor- 
tion to that of the whole beast, than in countries where, improve- 
ment and population being further advanced, there is mote demand 
for butcher's-meat. Mr. Hume ob.serves, that in the Saaon times, 
the fleece was estiuiateJ at two-fifths of the value of the whole 
sheep, and that this was much above the proportion of its present 
estimalion.’*" In some provinces of Spain, I have been assured, the 
sheep is freijuenlly killed merely for the sake of the fleece and the 
tallow. I'lie carcase is often left to rot upon the ground, or to be de- 
voured by beasts and birds of prey. If this sometimes happens even 
in Spain, it happens almost constantly in Chili, at Buenos Ayres, 
and in many other parts of Spanish America, where the horned cat- 
tle are almost constantly killed merely for the sake of the hide and 
the tallow. This too used to happen almost constantly in HLspan- 
iola, while it was infested by the Buccaneers, and before the settle- 

»orU of 

Wool anrt 

hides in 



have a 



open to 

them thar 



In thinly 

the wool 
and hide 
arc more 
in proper 
tion to th 

'‘’■History, ed. of 1773, vol. i., p. azh. 

““Juan and Ulloa, Voyage hislorique, adc ptie, liv. i., chap, v., vol. i., p. 55*. 

of im- 
ment the 
wool and 
not so 
much as 
the car- 

wool has 
since 1339. 


ment, improvement, and populousness of die French plantations 
(which now extend round the coast of almost the whole western 
half of the island) had given some value to the cattle of the Span- 
iards, who still continue to possess, not only the eastern part of the 
coast, but the whole inland and mountainous part of the country. 

Though in the progress of improvement and population, the price 
of the whole beast necessarily rises, yet the price of the carcase is 
likely to be much more affected by this rise than that of the wool 
and the hide. The market for the carcase, being in the rude state of 
society confined always to the country which produces it, must nec- 
essarily be extended in proportion to the improvement and popu- 
lation of that country. But the market for the wool and the hides 
even of a barbarous country often extending to the whole commer- 
cial world, it can very seldom be enlarged in the same proportion. 
The state of the whole commercial world can seldom be much af- 
fected by the improvement of any particular country; and the mar- 
ket for such commodities may remain the same, or very nearly the 
same, after such improvements, as before. It should, however, in 
the natural course of things rather upon the whole be somewhat ex- 
tended in consequence of them. If the manufactures, especially, of 
which those commodities are the materials, should ever come to 
flourish in the country, the market, though it might not be much 
enlarged, would at least be brought much nearer to the place of 
growth than before: and the price of those materials might at least 
be increased by what had usually been the expence of transporting 
them to distant countries. Though it might not rise therefore in the 
same proportion as that of butcher 's-meat, it ought naturally to 
rise somewhat, and it ought certainly not to fall. 

In England, however, notwithstanding the flourishing state of its 
woollen manufacture, the price of English wool has fallen very con- 
siderably since the time of Edward III. There are many authentic 
records which demonstrate that during the reign of that prince (to- 
wads the middle of the fourteenth century, or about 13,39) ^^'hat 
was reckoned the moderate and reasonable price of the tod or twen- 
ty-ei,ght pounds of English wool was not less than ten .shillings of 
the money of those times, containing, at the rale of twenty-pence 
the ounce, six ounces of silver Tower-weight, equal to about thirty 
shillings of our present money. In the present times, one-and-twen- 
ty shillings the tod may be reckoned a good price for very good 
English wool. The money-price of wool, therefore, in the time of 

““See Smith's Memoirs of Wool, vol. i. c. 6, and 7; also, vol. ii. c. 176. 
Ed. I does not give the volumes and chapters. The work was Chronicon Rus- 
tkwn-Commerciale, or Memoirs of Wool, etc., by John Smith, and pub- 
lished 1747; see below, p. 616. 



Edward III, was to its money-price in the present times as ten to 
seven. The superiority of its red price was still greater. At the rate 
of six shillings and eight-pence the quarter, ten shillings was in ' 
those ancient ti.mes the price of twelve bushels of wheat. At the rate 
of twenty-eight shillings the quarter, one-and-twenty shillings is in 
the present times the price of six bushels only. The proportion be- 
tween the real prices of ancient and modern times, therefore, is as 
twelve to six, or as two to one. In those ancient times a tod of wool 
would have purchased' twice the quantity of subsistence which it 
will purchase at present; and consequently twice the quantity of 
labour, if the real recompence of labour had been the same in both 

This degradation both in the real and nominal value of wool, 
could never have happened in consequence of the natural course of 
things. It has accordingly been the effect of violence and artifice; 
First, of the absolute prohibition of exporting wool from Eng- 
land; Secondly, of the permission of importing it from Spain 
duty free ; Thirdly, of the prohibition of exporting it from Ireland 
to any other country but England. In consequence of these regula- 
tions, the market for English wod, instead of being somewhat ex- 
tended in consequence of the improvement of England, has been 
confined to the home market, where the wool of several other coun- 
tries is allowed to come into competition with it, and where that 
of Ireland is forced into competition with it. As the woollen manu- 
factures too of Ireland are fully as much discouraged as is consis- 
tent with justice and fair dealing, the Irish can work up but a small 
part of their own wool at home, and are, therefore, obliged to send 
a greater proportion of it to Great Britain, the only market they 
are allowed. 

I ha^•e not been able to find any such authentic records concern- 
ing the price of raw hides in ancient times. Wool w'as commonly 
paid as a subsidy to the king, and its valuation in that subsidy as- 
certains, at least in some degree, what was its ordinary price. But 
this seems have been the case with raw hides. Fleetw'ood, 
however, from an account in 1425, between the prior of Burcester 
Oxford and one of his canons, gives us their price, at least as it was 
stated, upon that partiailar occasion; viz. five ox hides at twelve 
shillings; five cow hides at seven shillings and three pence; thirty- 
six sheep skins of two years old at nine shillings; sixteen calves 

’“See below, p. 612, and Smith’s 3/eOTO!fj-o/TFool,vol.i.,pp. 159, 170, i8a. 

Eds. 1 and 2 read “importing it from all other countries.” 

Eds. I and 2 read "wool of all other countries.” 

This ha! 
caused 1 

The re a 
price of 
hides at 
than in 
the fif- 

but their 
price dur- 
ing the 
century is 

232 the wealth of nations 

skins at two shillings.*“^ In 1425, twelve shillings contained about 
the same quantity of silver as four-and-twenty shillings of our pres- 
ent money. An ox hide, therefore, was in this account valued at the 
same quantity of silver as 4^.^ ths of our present money. Its nom- 
inal price was a good deal lower than at present. But at the rate of 
six shillings and eight-pence the quarter, twelve shillings would in 
those times have purchased fourteen bushels and four-fifths of a 
bushel of wheat, which, at three and six-pence the bushel, would in 
the present times cost 51J. 4d. An ox hide, therefore, would in 
those times have purchased as much corn as ten shillings and three- 
pence would purchase at present. Its real value was equal to ten 
shillings and three-pence of our present money. In those ancient 
times, when the cattle were half starved during the greater part of 
the winter, we cannot suppose that they were of a very large size. 
An ox hide which weighs four stone of sixteen pounds averdupois, 
is not in the present times reckoned a bad one; and in those ancient 
times would probably have been reckoned a very good one. But at 
half a crown the stone, which at this moment (February 1773) I 
understand to be the common price, such a hide would at present 
cost only ten shillings. Though its nominal price, therefore, is high- 
er in the present than it was in those ancient times, its real price, 
the real quantity of subsistence which it will purchase or command, 
is rather somewhat lower. The price of cow hides, as stated in the 
above account, is nearly in the common proportion to that of ox 
hides. That of sheep skins is a good deal above it. They had prob- 
ably been sold with the wool. That of calves skins, on the contrary, 
is greatly below it. In countries where the price of cattle is very 
low, the calves, which are not intended to be reared in order to keep 
up tbs stock, are generally killed very young; as was the case in 
Scotland twenty or thirty years ago. It saves the milk, which their 
price v/ouid not pa}" for. Their skins, therefore, are commonly good 
for little. 

The price of raw' hides is a good deal lower at present than it was 
a few years ago; ov/ing probably to the taking off the duty upon 
seal skins, and to the allowing, for a limited time, the importation 
of raw hides from Ireland and from the plantations duty free, which 
was done in 1769.'®* Take the whole of the present century at an 
average, their real price has probably been somewhat higher than 
it was in those ancient times. The nature of the commodity renders 

^ Chrordcon pndosum, ed. of 1707, p. 100, quoting from Kennet’s Par. 
Ant Burcester is the modem Bicester. 

9 Geo. III., c, 39, for five years; continued by 14 Geo. III., c. 86, and 21 
Geo. III., c. 29. 


it not quite so proper for being transported to distant markets as 
wool. It suffers more by keeping. A salted hide is reckoned inferior 
to a fresh one, and sells for a lower price. This circumstance must 
necessarily have some tendency to sink the price of raw hides pro- 
duced in a country which does not manufacture them, but is obliged 
to export them; and comparatively to raise that of those pro- 
duced in a country which docs manufacture them. It must have 
some tendency to sink their price in a barbarous, and to raise it 
in an improved and manufacturing country. It mu^t have had some 
tendency therefore to sink it in ancient, and to raise it in modern 
times. Our tanners besides have not been quite so successful as our 
clothiers, in convincing the wisdom of the nation, that the safety of 
the commonwealth depends upon the prosperity of their particular 
manufacture. They have accordingly been much less favoured. The 
exportation of raw hides has, indeed, been prohibited, and declared 
a nuisance: but their importation fiom foreign countries has 
been subjected to a duty: and though this duty has been taken 
off from those of Ireland and the plantations (for the limited time 
of five years only) , yet Ireland has not been confined to the market 
of Great Britain for the sale of its surplus hides, or of those which 
are not manufactured at home. The hides of common cattle have 
but within these few years been put among the enumerated com- 
modities which the plantations can send no-where but to the mother 
country; neither has the commerce of Ireland been in this case op- 
pressed hitherto, in order to support the manufactures of Great 

Whatever regulations tend to sink the price either of wool or of 
raw hides below what it naturally would be, must, in an improved 
and cultivated country, have some tendency to raise the price of 
butcher's-meat. The price both of the great and small cattle, which 
are fed on improved and cultivated land, must be sufficient to pay 
the rent which the landlord, and the profit which the farmer has rea- 
son to expect from improved and cultivated land. If it is not, they 
will soon cease io feed them. Whatever part of this price, therefore, 
is not paid by the wool and the hide, must be paid by the carcase. 
The less there is paid for the one, the more must be paid for the 
other. In what manner this price is to be divided upon the different 
parts of the beast, is indifferent to the landlords and farmers, pro- 
vided it is all paid to them. In an improved and cultivated country, 

By 3 Eliz , c. 22 ; 8 Eliz , e. 14; 18 Eliz., c. 9 ; 13 and 14 Car. II., c. 7, 
which last uses the words 'common and public nuisance.” See Blackstone, 
Conmvntaries, vol. iv., pp. 167-169. 

”"9 Ann.,c. II. 

They a 
not so 

and tar 
ners ha 
not bee 
so muc 
by leui: 
latiun a 

price ol 
wool 01 
hides in 
raise th 
price oi 

but not in 
an unim- 

sank the 
price of 
wool, . 
while it 
raised the 
price of 

The effi- 
cacy of 
in increas- 
ing wool 


therefore, their interest as landlords and farmers cannot be much 
affected by such regulations, though their interest as consumers 
may, by the rise in the price of provisions.-''' ft would be quite oth- 
erwise, however, in an unimproved and uncultivated country, where 
the greater part of the lands could be applied to no other purpose 
but the feeding of cattle, and where the wool and the hide made the 
principal part of the value of those cattle. Their interest as land- 
lords and farmers would in this case be very deeply affected by 
such regulations, and their interest as consumers very little. The fall 
in the price of the wool and the hide, would not in this case raise the 
price of the carcase; because the greater part of the lands of the 
country being applicable to no other purpose but the feeding of cat- 
tle, the same number would still continue to be fed. The same quan- 
tity of butcher’s-meat would still come to market. The demand for 
it would be no greater than before. Its price, therefore, would be the 
same as before. The whole price of cattle would fall, and along with 
it both the rent and the profit of all those lands of which cattle was 
the principal produce, that is, of the greater part of the lands of the 
country. The perpetual prohibition of the exportation of wool, 
which is commonly, but very falsely, ascribed to Edward 111,“"“ 
would, in the then circumstances of the country, have been the 
most destnictive regulation which could well have been thought of. 
It would not only have reduced the actual value of the greater part 
of the lands of the kingdom, but by reducing the price of the most 
important species of small cattle, it would have retarded very much 
its subsequent improvement. 

The wool of Scotland fell very considerably in its price in conse- 
quence of the union with England, by which it was excluded from 
the great market of Europe, and confined to the narrow one of 
Great Britain. The value of the greater part of the lands in the 
southern counties of Scotland, which are chiefly a sheep country, 
would have been very deeply affected by this event, had not the rise 
in the price of butcher’s-meat fully compensated the fall in the price 
of wool. 

As the efficacy of human industry, in increasing the quantity 
either of wool or of raw hides, is limited, so far as it depends upon 
the produce of the country where it is exerted; so it is uncertain so 
far as it depends upon the produce of other countries. It so far de- 
pends, not so much upon the quantity which they produce, as upon 

“This passage, from the beginning of the paragraph, is quoted at length 
below, p. 617. 

“John Smith, Memoirs of Wool, vol. i., p. 25, explains that the words “It 
shall be felony to carry away any wool out of the realm until it be otherwise 
ordained” do not imply a perpetual prohibition. 


that which they do not manufacture; and upon the restraints 
which they may or may not think proper to impose upon the ex- 
portation of this sort of rude produce. These circumstances, as 
they are altogether independent of domestic industry, so they nec- 
essarily render the efficacy of its efforts more or less uncertain. In 
multiplying this sort of rude produce, therefore, the efficacy of hu- 
man industry is not only limited, but uncertain. 

In multiplying another very important sort of rude produce, the 
quantity of fish that is brought to market, it is likewise both lim- 
ited and uncertain. It is limited by the local situation of the coun- 
try, by the proximity or distance of its different provinces from the 
sea, by the number of its lakes and rivers, and by what may be 
called the fertility or barrenness of those seas, lakes and rivers, as 
to this sort of rude produce. As population increases, as the annual 
produce of the land and labour of the country grows greater and 
greater, there come to be more buyers of fish, and those buyers too 
have a greater quantity and variety of other goods, or, what is the 
same thing, the price of a greater quantity and variety of other 
goods, to buy with. But it will generally be impossible to supply the 
great and extended market without employing a quantity of labour 
greater than in proportion to what had been requisite for supplying 
the narrow and confined one. A market which, from requiring only 
one thousand, comes to require annually ten thousand ton of fish, 
can seldom be supplied without employing more than ten times the 
quantity of labour which had before been sufficient to supply it. The 
fish must generally be sought for at a greater distance, larger vessels 
must be employed, and more expensive machinery of every kind 
made use of. The real price of this commodity, therefore, naturally 
rises in the progress of improvement. It has accordingly done so, I 
believe, more or less in every country. 

Though the success of a particular day’s fishing may be a very 
uncertain matter, yet, the local situation of the country being sup- 
posed, the general efficacy of industry in bringing a certain quan- 
tity of fish to market, taking the course of a year, or of several years 
together, it may perhaps be thought, is certain enough: and it, no 
doubt, is so. As it depends more, however, upon the local situation 
of the country, than upon the state of its wealth and industry; as 
upon this account it may in different countries be the same in very 
different periods of improvement, and very different in the same 
period; its connection with the state of improvement is uncertain, 
and it is of this sort of uncertainty that I am here speaking. 

In increasing the quantity of the different minerals and metals 
which are drawn from the bowels of the earth, that of the more 

and hii 
is both 



true of 




rise in 

the pre 




The coi 
with th 
state of 
ment is 


<hc effi- 
cacy of 
is not 
but un- 


of the 
metals in 
a country 
on its 
power of 
ing and 
the fertil- 
ity of the 

So far as 
it depends 
on the 
the real 
price is 
likely to 
rise with 

so far as it 
on the 
latter cir- 
the real 
price will 
vary with 
the fer- 
tility of 
the mines, 

which has 
no con- 
with the 
state of 


precious ones particularly, the efficacy of human industry seems not 
to be limited, but to be altogether uncertain. 

The quantity of the precious metals which is to be found in any 
country is not limited by any thing in its local situation, such as the 
fertility or barrenness of its own mines. Those metals frequently 
abound in countries which possess no mines. Their quantity in 
every particular country seems to depend upon two different cir- 
cumstances; first, upon its power of purchasing, upon the state of 
its industry, upon the annual produce of its land and labour, in con- 
sequence of which it can afford to employ a greater or a smaller 
quantity of labour and subsistence in bringing or purchasing such 
superfluities as gold and silver, either from its own mines or from 
those of other countries; and, secondly, upon the fertility or bar- 
renness of the mines which may happen at any particular time to 
supply the commercial world \vith those metals. The quantity of 
those metals in the countries most remote from the mines, must be 
more or less affected by this fertility or barrenness, on account of 
the easy and cheap transportation of those metals, of their small 
bulk and great value. Their quantity in China and Indostan must 
have been more or less affected by the abundance of the mines of 

So far as their quantity in any particular country depends upon 
the former of those two circumstances (the power of purchasing), 
their real price, like that of all other luxuries and superfluities, is 
likely to rise with the wealth and improvement of the country, and 
to fall with its poverty and depression. Countries which have a great 
quantity of labour and subsistence to spare, can afford to purchase 
any particular quantity of those metals at the expcnce of a greater 
quantity of labour and subsistence, than countries which have le=5 
to spare. 

So far as their quantity in any particular country depends upon 
the latter of those two circumstances (the fertility or barrenness of 
the mines which happen to supply the commercial world) their real 
price, the real quantity of labour and subsistence -vhich they will 
purchase or exchange for, will, no doubt, sink more or less in pro- 
portion to the fertility, and rise in proportion to the barrenness, of 
those mines. 

The fertility or barrenness of the mines, however, which may 
happen at any particular time to supply the commercial world, is a 
circumstance which, it is evident, may have no sort of connection 
with the state of industry in a particular country. Tt seems even to 
have no very necessary connection with that of the world in gen- 
eral. As arts and commerce, indeed, gradually spread themselves 


uver a greater and a greater part of the earth, the search for new 
mines, being extended over a wider surface, may have somewhat a 
better chance for being successful, than when confined within nar- 
rower bounds. The discovery of new mines, however, as the old ones 
come to be gradually exhausted, is a matter of the greatest uncer- 
tainty, and such as no human skill or industry can ensure. -\U indi- 
cations, it is acknowledged, are doubtful, and the actual discovery 
and successful working of a new mine can alone ascertain the re- 
ality of its value, or even of its existence. In this search there seem 
to be no certain limits either to the possible success, or to the pos- 
sible disappointment of human industry. In the course of a century 
or two, it is possible that new mines may be discovered more fer- 
tile than any that have ever yet been known; and it is just equally 
possible that the most fertile mine then known may be more barren 
than any that was wrought before the discovery of the mines of 
America. Whether the one or the other of those two events may hap- 
pen to take place, is of very little importance to the real wealth and 
prosperity of the world, to the real value of the annual produce of 
the land and labour of mankind. Its nominal value, the quantity of 
gold and silver by which this annual produce could be expressed or 
represented, would, no doubt, be very different; but its real value, 
the real quantity of labour which it could purchase or command, 
would be precisely the same. A shilling might in the one case rep- 
resent no more labour than a penny does at present: and a penny in 
the other might represent as much as a shilling does now. But in the 
one case he who had a shilling in his pocket, would be no richer than 
he who has a penny at present; and in the other he who had a penny 
would be just as rich as he who has a shilling now. The cheapness 
and abundance of gold and silver plate, would be the sole advantage 
which the world could derive from the one event, and the dearness 
and scarcity of those trifling superfluities the only inconveniency it 
could suffer from the other. 

Conclusion of the Digression concerning the Variations in the Value 
of Silver 

The greater part of the writers who have collected the money prices 
of things in ancient times, seem to have considered the low money 
price of corn, and of goods in general, or, in other words, the high 
value of gold and silver, as a proof, not only of the scarcity of those 
metals, but of the poverty and barbarism of the country at the time 
when it took place. This notion is connected with the system of po- 


value 0 
metals 1 
no pro( 

and bar- 


litical (Economy which represents national wealth as consisting in 
the abundance, and national poverty in the scarcity, of gold and sil- 
’ ver; a system which I shall endeavour to explain and examine at 
great length in the fourth book of this enquiry. I shall only observe 
at present, that the high value of the precious metals can be no 
proof of the poverty or barbarism of any particular country at the 
time when it took place. It is a proof only of the barrenness of the 
mines which happened at that lime to supply the commercial world. 
A poor country, as it cannot afford to buy more, so it can as little af- 
ford to pay dearer for gold and silver than a rich one; and the value 
of those metals, therefore, is not likely to be higher in the former 
than in the latter. In China, a country much richer than any part 
of Europe,-*'^ the value of the precious metals is much higher than 
in any part of Europe. As the wealth of Europe, indeed, has in- 
creased greatly since the discovery of the mines of .America, so the 
value of gold and silver has gradually diminished. This diminution 
of their value, however, has not been owing to the increase of the 
real wealth of Europe, of the annual produce of its land and labour, 
but to the accidental discovery of more abundant mines than any 
that were known before. The increase of the (juantity of gold and 
silver in Europe, and the increase of its manufactures and agricul- 
ture, are two events which, though they have happened nearly 
about the same time, yet have arisen from very different causes, and 
have scarce any natural connection with one another. The one has 
arisen from a mere accident, in which neither prudence nor policy 
either had or could have any .share: The other from the fall of the 
feudal .system, and from the establishment of a government which 
afforded to industry the only encouragement which it requires, .some 
tolerable security that it shall enjoy the fruits of its own labour. 
Poland, where the feudal system still continues to take place, is at 
this day as beggarly a country as it was before the discovery of 
America. The money price of corn, however, has risen; the real 
value of the precious metals has fallen in Poland, in the same man- 
ner as in other parts of Europe. Their quantity, ’^herefore, must 
have increased there as in other places, and nearly in the same prf>- 
portion to the annual produce of its land and labour. This increase 
of the quantity of those metals, however, has not, it seems, in 
creased that annual produce, has neither improved the manufac- 
tures and agriculture of the country, nor mended the circumstances 
of its inhabitants. Spain and Portugal, the countries which possjss 
the mines, are after Poland, perhaps, the two most beggarly coun- 

The same words occur above, p. 189. 



tries in Europe. The value of the precious metals, however, must be 
lower in Spain and Portugal than in any other part of Europe; as 
they come from those countries to all other parts of Europe, loaded,' 
not only with a freight and an insurance, but with the expence of 
smuggling, their exportation being either prohibited, or subjected 
to a duty. In proportion to the annual produce of the land and la- 
bour, therefore, their quantity must be greater in those countries 
than in any other part of Europe; Those countries, however, are 
poorer than the greater part of Europe. Though the feudal system 
has been abolished in Spain and Portugal, it has not been succeeded 
by a much better. 

As the low value of gold and silver, therefore, is no proof of the 
wealth and flourishing state of the country where it takes place; so 
neither is their high value, or the low money price either of goods in 
general, or of corn in particular, any proof of its poverty and bar- 

But though the low money price either of goods in general, or of 
corn in particular, be no proof of the poverty or barbarism of the 
times, the low money price of some particular sorts of goods, such 
as cattle, poultry, game of all kinds, &c.-“'‘ in proportion to that of 
corn, is a most decisive (me. It clearly demonstrates, first, their 
great abundance in proportion to that of corn, and consequently the 
great extent of the lan(i which they occupied in proportion to what 
was occupied by corn; and, secondly, the low value of this land in 
proportion to that of corn land, and consequently the uncultivated 
and unimproved state of the far greater part of the lands of the 
country, ft clearly demonstrates that the stock and population of 
the country did not bear the same proportion to the extent of its 
territory, which they commonly do in civilized countries, and that 
society was at that time, and in that country, but in its infancy. 
From the high or low money price either of goods in general, or of 
corn in particular, we can infer only that the mines which at that 
time happened to supply the commercial world with gold and silver, 
were fertile or Joarren, not that the country was rich or poor. But 
from the high or low money price of some sorts of goods in propor- 
tion to that of others, we can infer, with a degree of probability that 
approaches almost to certainty, that it was rich or poor, that the 
greater part of its lands were improved or unimproved, and that it 
was either in a more or less barbarous state, or in a more or less civ- 
ilized one. 

Any rise in the money price of goods which proceeded altogether 

but th 
low pr 
of catt 
is .1 pri 
of pov 
ty orb 

Ed, I does not contain “5:c.’ 

A rise of 
price due 
entiiely tp 
tion of 
would af- 
fect all 
but corn 
has risen 
much less 
than other 

and has 



lower in 
than in 

while its 
high price 
has been 
due only 
to bad 

The dis- 
between a 
rise of 
prices and 

240 the wealth of nations 

from the degradation of the value of silver, would affect all sorts of 
goods equally, and raise their price universally a third, or a fourth, 
■ or a fifth part higher, according as silver happened to lose a third, 
or a fourth, or a fifth part of its former value.-”''’ But the rise in the 
price of provisions, which has been the subject of so much reasoning 
and conversation, does not affect all sorts of provisions equally. 
Taking the course of tlie present century at an average, the price of 
corn, it is acknowledged, even by those ■«'ho account for this rise by 
the degradation of the value of silver, has risen much less than that 
of some other sorts of provisions. The rise in the price of those other 
sorts of provisions, therefore, cannot be owing altogether to the deg- 
radation of the value of silver. Some other causes must be taken 
into the account, and those which have been above assigned, will, 
perhaps, without having recourse to the supposed degradation of 
the value of silver, sufficiently explain this rise in those particular 
sorts of provisions of which the price has actually risen in propor- 
tion to that of corn. 

As to the price of corn itself, it has, during the sixty-four first 
years of the present century, and before the late extraordinary 
course of bad seasons, been somewhat lower than it was during the 
sixty-tour last years of the preceding century. This fact is attested, 
not only by the accounts of Windsor market,-"'* but by the public 
fiars of all the different counties of Scotland, and by the accounts 
of several different markets in France, which have been collected 
with great diligence and fidelity by ]\Ir. Me-ssance,^""* and by Mr. 
Dupre de St. Maur.-"’ The evidence is more complete than could 
well have been expected in a matter which is naturally so very dif- 
ficult to be ascertained. 

.■^s to the high price of corn during these last ten or twelve years, 
it can be sufficiently accounted for from the badness of the seasons, 
without supposing any degradation in the value of silver. 

The opinion, therefore, that silver is continually sinking in its 
value, seems not to be founded upon any good observations, either 
upon the prices of com, or upon those of other provisions. 

The same quantity of silver, it may, perhaps, be said, will in the 
present times, even according to the account which has been here 
given, purchase a much smaller quantity of several sorts of pro- 
visions than it would have done during some part of the last cen- 

®®Thc arithmetic is slightly at fault. It should be, "happened to lose a 
fourth, a fifth, or a sixth part of its former value.” 

“Below, pp. 257, 258. “Above, p. 76. 

Hccherches sur la Pojnilation, pp. 293-304. 

Rssai sur les monnoics ou reflexions sur le rapport eitire I'argent et les 
demies, 1746, esp, p. 181 of the “Variations dans les prix.” 



tury; and to ascertain whether this change be owing to a rise in the 
value of those goods, or to a fall in the value of silver, is only to es- 
tablish a vain and useless distinction, which can be of no sort of ser- 
vice to the man who has only a certain quantity of silver to go to 
market with, or a certain fixed revenue in money. I certainly do not 
pretend that the knowledge of this distinction will enable him to 
buy cheaper. It may not, however, upon that account be altogether 

It may be of some use to the public by affording an easy proof of 
the prosperous condition of the country. If the rise in the price of 
some sorts of provisions be owing altogether to a fall in the value 
of silver, it is owing to a circumstance from which nothing can be 
inferred but the fertility of the American mines. The real wealth of 
the country, the annual produce of its land and labour, may, not- 
withstanding this circumstance, be either gradually declining, as in 
Portugal and Poland; or gradually advancing, as in most other 
parts of Europe. But if this rise in the price of some sorts of pro- 
visions be owing to a rise in the real value of the land which pro- 
duces them, to its increased fertility; or, in consequence of more ex- 
tended improvement and good cultivation, to its having been ren- 
dered fit for producing corn; it is owing to a circumstance which in- 
dicates in the clearest manner the prosperous and advancing state 
of the country. The land constitutes by far the greatest, the most 
important, and the most durable part of the wealth of every exten- 
sive country. It may surely be of some use, or, at least, it may give 
some satisfaction to the Public, to have so decisive a proof of the in- 
creasing value of by far the greatest, the most important, and the 
most durable part of its wealth. 

It may too be of some use to the Public in regulating the pecun- 
iary reward of some of its inferior servants. If this rise in the price 
of some sorts of provisions be owing to a fall in the value of silver, 
their pecuniary reward, pro^’ided it was not too large before, ought 
certainly to be augmented in proportion to the extent of this fall. If 
it is not augmented, their real recompence will evidently be so much 
diminished. But if this lise of price is owing to the increased value, 
in consequence of the improved fertility of the land which produces 
such provisions, it becomes a much nicer matter to judge either in 
what proportion any pecuniary reward ought to be augmented, or 
whether it ought to be augmented at all. The e.xtension of improve- 
ment and cultivation, as it necessarily raises more or less, in pro- 
portion to the price of com, that of every sort of animal food, so it 
as necessarily lowers that of, I believe, every sort of vegetable food. 
It raises the price of animal food; because a great part of the land 

a fall i 
the va 
of silv 
is not 

it a 9 o: 
the pn 
the CO' 

and mi 
he of u 
lating 1 
the inf 
or ser- 
the sta 

The poor 
are more 
by the ar- 
tificial rise 
of some 
tures than 
by the 
rise of 
rude pro- 
duce other 
than corn. 

But the 
^ect of 
jnent is to 


which produces it, being rendered fit for producing corn, must af- 
ford to the landlord and fanner the rent and profit of corn land. It 
lowers the price of vegetable food; because, by increasing the fer- 
tility of the land, it increases its abundance. The improvements of 
agriculture too introduce many sorts of vegetable food, which, re- 
quiring less land and not more labour than corn, come much cheap- 
er to market. Such are potatoes and maize, or what is called Indian 
corn, the two most important improvements which the agriculture 
of Europe, perhaps, which Europe itself, has received from the great 
extension of its commerce and navigation, itlany sorts of vegetable 
food, besides, which in the rude state of agriculture are confined to 
the kitchen-garden, and raised only by the spade, come in its im- 
proved state to be introduced into common fields, and to be raised 
by the plough: such as turnips, carrots, cabbages, &c. If in the prog- 
ress of improvement, therefore, the real price of one species of food 
necessarily rises, that of another as necessarily falls, and it becomes 
a matter of more nicety to judge how far the rise in the one may be 
compensated by the fall in the other. 111100 the real price of butch- 
er’s-meat has once got to its height (which, with regard 10 every 
sort, except, perhaps, that of hogs flesh, it seems to have done 
through a great part of England more than a century ago) , any rise 
which can afterwards happen in that of any other sort of animal 
food, cannot much affect the circumstances of the inferior ranks of 
people. The circumstances of the poor through a great part of Eng- 
land cannot surely be so much distressed by any rise in the price of 
poultry, fish, wild-fowl, or venison, as they must be relieved by the 
fall in that of potatoes. 

In the present season of scarcity the high price of corn no doubt 
distresses the poor. But in times of moderate plenty, when corn is 
at its ordinary or average price, the natural rise in the price of any 
other sort of rude produce cannot much affect them. They suffer 
more, perhaps, by the artificial rise which has been occasioned by 
taxes in the price of some manufactured commodities; as of salt, 
soap, leather, candles, malt, beer, and ale, &c. 

Effects oj the Progress of Improvement upon the real Price of 

It is the natural effect of improvement, however, to diminish 
gradually the real price of almost all manufactures. That of the 
manufacturing workmanship diminishes, perhaps, in all of them 
without exception. In consequence of better machinery, of greater 

dexterity, and of a more proper division and distribution of work, dimin 
all of which are the natural effects of improvement, a much smaller ‘ f 
quantity of labour becomes requisite for executing any particular' iactur 
piece of work; and though, in consequence of the flourishing cir- 
cumstances of the society, the real price of labour should rise very 
considerably, yet the great diminution of the quantity will general- 
ly much more than compensate the greatest rise which can happen 
in the price."*®"' 

There are, indeed, a few manufactures, in which the necessary In a ft 
rise in the real price of the rude materials will more than compen- 
sate all the advantages which improvement can introduce into the rkc in 
execution of the work. In carpenters and joiners work, and in the pdcr t 
coarser sort of cabinet work, the necessary rise in the real price of 
barren timber, in consequence of the improvement of land, will countt 
more than compensate all the advantages which can be derived I’®''*®’- 
from the best machinery, the greatest dexterity, and the most prop- 

er division and distribution of work. execut 

But in all cases in which the real price of the rude materials but in 
either does not rise at all, or does not rise very much, that of the 
manufactured commodity sinks very considerably. 

This diminution of price has, in the course of the present and sideral 
preceding century, been most remarkable in those manufactures of 
which the materials are the coarser metals. A better movement of a Since 
watch, than about the middle of the last century could have been 
bought for twenty pounds, may now perhaps be had for twenty most r 
shillings. In the work of cutlers and locksmiths, in all the toys *** 
which are made of the coarser metak, and in all those goods which 
are commonly known by the name of Birmingham and Sheffield made ( 
tvare, there has been, during the same period, a very great reduction 
of price, though not altogether so great as in watch-work. It has, metals 
however, been sufficient to astonish the workmen of every other 
part of Europe, who in many cases acknowledge that they can pro- 
duce no work of equal goodness for double, or even for triple the 
price. There are perhaps no manufactures in which the division of 
labour can be carried further, or in which the machinery employed 
admits of a greater variety of improvements, than those of which 
the materials are the coarser metals. 

In the clothing manufacture there has, during the same period. Cloth! 
been no such sensible reduction of price. The price of superfine 
cloth, I have been assured, on the contrary, has, within these five- much! 
and-twenty or thirty years, risen somewhat in proportion to its thesai 
quality; owing, it was said, to a considerable rise in the price of the 

“Above, p. 86. ‘^Lectures, pp. 159, 164. 


but very 
ably since 
the fif- 

Fine cloth 
has fallen 
to less 
than one- 
third of 
its price 
in 1487, 

cloth has 


material, which consists altogether of Spanish wool. That of the 
Yorkshire cloth, which is made altogether of English wool, is said 
• indeed, during the course of the present century, to have fallen a 
good deal in proportion to its quality. Quality, however, is so very 
disputable a matter, that I look upon all information of this kind as 
somewhat uncertain. In the clothing manufacture, the division of 
labour is nearly the same now as it was a century ago, and the 
machinery employed is not very different. There may, however, 
have been some small improvements in both, which may have oc- 
casioned some reduction of price. 

But-'- the reduction will appear much more sensible and un- 
deniable, if we compare the price of this manufacture in the present 
times with what it was in a much remoter period, towards the end 
of the fifteenth century, when the labour was probably much less 
subdivided, and the machinery employed much more imperfect, 
than it is at present. 

In 1487, being the 4th of Henry VII."'" it was enacted, that 
“whosoever shall sell by retail a broad yard of the finest scarlet 
grained, or of other grained cloth of the finest making, above six- 
teen shillings, shall forfeit forty shillings for every yard so sold.” 
Sixteen shillings, therefore, containing about the same quantity of 
silver as four-and-twcnty shillings of our present money, was, at 
that time, reckoned not an unreasonable price for a yard of the fin- 
est cloth : and as this is a sumptuary law, such cloth, it is probable, 
had usually been sold somewhat dearer. A guinea may be reckoned 
the highest price in the present times. Even though the quality of 
the cloths, therefore, should be supposed equal, and that of the 
present limes is most probably much superior, yet, even upon this 
supposition, the money price of the finest cloth appears to have 
been considerably reduced since the end of the fifteenth century. 
But its real price has been much more reduced. Six shillings and 
eight-pence was then, and long afterwards, reckoned the average 
price of a quarter of wheat. Sixteen shillings, therefore, was the 
price of two quarters and more than three bu.shels of wheat. Valuing 
a quarter of wheat in the pre.scnt times at eight-and-twenty shill- 
ings, the real price of a yard of fine cloth must, in those times, have 
been equal to at least three pounds six shillings and sixpence of our 
present money. The man who bought it must have parted with the 
command of a quantity of labour and subsistence equal to what that 
sum would purchase in the present times. 

The reduction in the real price of the coarse manufacture, though 
considerable, has not been so great as in that of the fine. 

Ed. I does not contain “but.” 

“C. 8. 


In 1463, being the 3d of Edward IV it was enacted, that ‘‘no 
servant in husbandry, nor common labourer, nor servant to any ar-_ 
tificer inhabiting out of a city or burgh, shall use or wear in their 
clothing any cloth above two shillings the broad yard.'’ In the 3d of 
Edward IV. two shillings contained very nearly the same quantity 
of silver as four of our present money. But the Yorkshire cloth 
which is now sold at four shillings the yard, is probably much su- 
perior to any that was then made for the wearing of the very poorest 
order of common servants. Even the money price of their clothing, 
therefore, may. in proportion to the quality, be somewhat cheaper 
in the present than it was in those ancient times. The real price is 
certainly a good deal cheaper. Ten-pence was then reckoned what is 
called the moderate and reasonable price of a bushel of wheat. Two 
shillings, therefore, was the price of two bushels and near two pecks 
of wheat, which in the present times, at three shillings and sixpence 
the bushel, would be worth eight shillings and nine-pence. For a 
yard of this cloth the poor servant must have parted with the power 
of purchasing a quantity of subsistence equal to what eight shillings 
and nine-pence would purchase in the present times. This is a 
sumptuary law too, restraining the luxury and extravagance of the 
poor. Their clothing, therefore, had commonly been much more 

The same order of people are, by the same law, prohibited from 
wearing hose, of which the price should exceed fourteen-pence the 
pair, equal to about eight-and-twenty pence of our present money. 
But fourteen-pence was in those times the price of a bushel and near 
two pecks of wheat; which, in the present times, at three and six- 
pence the bushel, would cost five shillings and three-pence. We 
should in the present limes consider this as a very high price for a 
pair of stockings to a servant of the poorest and lowest order. He 
must, however, in those times have paid what was really equivalent 
to this price for them. 

In the time of Edward IV. the art of knitting stockings was prob- 
ably not knowp in any part of Europe. Their hose were made of 
common cloth, which may have been one of the causes of their dear- 
ness. The first person that wore stockings in England is said to have 
been Queen Elizabeth. She received them as a present from the 
Spanish ambassador.-^’’ 

C. 3. The quotations from this Act and from 4 Hen. VIL, c. 8, are not 
quite verbatim. 

■‘'■"Dr. Howell in his History of the World, vol. ii., p. 222, relates ‘that 
Queen Elizabeth, in this third year of her reign, was presented with a pair of 
black knit alk stockings by her silk woman. Mrs. Mountague, and thenceforth 
she never wore cloth ones any more.' This eminent author adds ‘that King 

of its 

ver> Cl 
since i 

when t 
made c 

The ma- 
for mak- 
ing cloth 
has been 
much im- 

which ex- 
fall of 

ture was 
a house 
hold one, 

246 th 4 wealth of nations 

Both in the coarse and in the fine woollen manufacture, the ma* 
chinery employed was much more imperfect m those ancient, than it 
IS in the present times It has since received three very capital im- 
provements, besides, probably, many smaller ones of which it may 
be difficult to ascertain either the number or the importance The 
three capital improvements are first, the exchange of the rock and 
spindle for the spmning-wheel, which, with the same quantity of la- 
bour, will perform more than double the quantity of work Second- 
ly, the use of seveial very ingenious machines which facilitate and 
abridge in a still greater proportion the winding of the worsted and 
woollen yarn, or the proper arrangement of the warp and woof be- 
fore they are put into the loom an operation which, pi e\ lous to the 
inventions of those machines, must have been extremely tedious and 
troublesome Thirdly, The employment of the fulling mill for thick- 
ening the cloth, instead of treading it m water Neithei wind nor 
water nulls of any kind were known in England so earlv as the be- 
ginning of the sixteenth century, nor, so fai as I know, in anv other 
part of Europe north of the ^Ips They had been introduced into 
Italy some time befoie 

The consideiation of these circumstances may, perhaps, in some 
measure explain to us why the leal puce both of the coarse and ot 
the fine manufacture, was so much higher in tn ise ancient, than it 
IS m the present times It co't a greater quantiti ot labour to bring 
the goods to market Ilhen they were bi ought thithei, therefore, 
they must have purchased or exchanged for the pi ice of a greater 

The coarse manufacture probably was in those ancient times, 
carried on in England, in the same mannei as it always has been in 
countnes where arts and manufactures aie in their infancy It i as 
probably a houshold manufacture, in which every diffeient part of 
the work was occasionally peiformed by all the different mei ibers 
of almost e\ ery pri\ ate family but so as to Lc their work niiH v hen 
they had nothing else to do, and not to be the principal business 
from which any of them derived the greater pait of their subsist- 

Hcnry Mil, tint niatmiiccnt and c\pcn^i\c Piincc woie ordinarii> cloth 
hose cve pi there came from Spam b\ great chance a pair of 'ilk stockings , 
for Spam v-rv earlv abounded m silk His son King Ldward \I was pre- 
sented witn a pair of long Spanish 'ilk stockings by Ins m rchant, Sir Thomas 
Grc«ham and the present was then much taken notice of’ Thus it is plam 
that the invention of knit silk stockings originally came from Spam Others 
relate that one William Rider, an apprentice on London Bridge seeing at the 
hou'e of an Italian merchant a pair of knit woreted stockings from Mantua, 
made with great skill a pair exactly like them which he presented in the year 
1564 to William Earl of Pembroke, and were the first of that kind worn in 
England’ — ^Adam Anderson, Histoncal and Chronologfcal Deduction oj the 
Origin oj Commerce, 1764, ad 1561 

SENT OF land: CONCLlfsiON *47 

ence. Tlie work which is performed in this manner, it has already 
been observed,*^® comes always much cheaper to market than that 
which is the principal or sole fund of the workman’s subsistence. 
The fine manufacture, on the other hand, was not in those times 
carried on in England, but in the rich and commercial country of 
Flanders; and it was probably conducted then, in the same manner 
as now, by people who derived the whole, or the principal part of 
their subsistence from it. It was besides a foreign manufacture, and 
must have paid some duty, the ancient custom of tonnage and 
poundage at least, to the king. This duty, indeed, would not prob- 
ably be very great. It was not then the policy of Europe to restrain, 
by high duties, the importation of foreign manufactures, but rather 
to encourage it, in order that merchants might be enabled to supply, 
at as easy a rate as possible, the great men with the conveniencies 
and luxuries which they wanted, and which the industry of their 
own country could not afford them. 

The consideration of these circumstances may perhaps in some 
measure explain to us why, in those ancient times, the real price of 
the coarse manufacture was, in proportion to that of the fine, so 
much lower than in the present times. 

Conclusion op the Chapter 

I SHALL conclude this very long chapter with observing that 
every improvement in the circumstances of the society tends ‘either 
directly or indirectly to raise the real rent of land, to increase the 
real wealth of the landlord, his power of purchasing the labour, or 
the pjioduce of the labour of other people. 

The extension of improvement and cultivation tends to raise St 
directly. The landlord's share of the produce necessarily increases 
with the increase of the produce. 

That rise in the real price of those parts of the rude produce of 
land, which is first the effect of extended improvement and cultiva- 
tion, and afterwards the cause of their being still further extended, 
the rise in the price of cattlb, for example, tends too to raise the rent 
of land directly, and in a still greater proportion. The real value of 
the landlord’s share, his real command of the labour of other people, 
not only rises with the real value of the produce, but the proportion 
of his share to the whole produce rises with it. That produce, after 
the rise in its real price, requires no more labour to collect it than 

“'Above, pp. ii6, 117. 

Towards the end of chapter x. the same words occur, omitting "very.” 

who ! 
it, ani 
ject ti 

why t 
er in[ 
to the 




the cii 






of im- 
ment : 
tion ra 
it ditei 

and so 

rise in 
the price 
of cattle, 

which re- 
duce the 
price of 
tures raise 
it indi- 

and so 
does every 
in the 
of useful 

The con- 
trary cir- 

are three 
parts of . 
and three 
orders of 

The inter- 
est of the 
tors oi 

248 the wealth of nations 

before. A smaller proportion of it will, therefore, be sufficient to re- 
place, with the ordinary profit, the stock which employs that la- 
bour. A greater proportion of it must, consequently, belong to the 

All those improvements in the productive powers of labour, 
which tend directly to reduce the real price of manufactures, tend 
indirectly to raise the real rent of land. The landlord exchanges that 
part of his rude produce, which is over and above his own consump- 
tion, or what comes to the same thing, the price of that part of it, 
for manufactured produce. IMiatever reduces the real price of the 
latter, raises that of the former. An equal quantity of the former be- 
comes thereby equivalent to a greater quantity of the latter; and 
the landlord is enabled to purchase a greater quantity of the con- 
veniencies, ornaments, or luxuries, which he has occasion for. 

Every increase in the real wealth of the society, every increase in 
the quantity of useful labour employed within it, tends indirectly to 
raise the real rent of land. A certain proportion of this labour nat- 
urally goes to the land. A greater number of men and cattle are em- 
ployed in its cultivation, the produce increases with the increase of 
the stock which is thus employed in raising it, and the rent increases 
with the produce. 

The contrary drcumstances, the neglect of cultivation and im- 
provement, the fall in the real price of any part of the rude produce 
of land, the rise in the real price of manufactures from the decay of 
manufacturing art and industry, the declension of the real wealth 
of the society, all tend, on the other hand, to lower the real rent of 
land, to reduce the real wealth of the landlord, to diminish his 
power of purchasing either the labour, or the produce of the labour 
of other people. 

I The whole annual produce of the land and labour of every coun- 
try, or what comes to the same thing, the whole price of that an- 
nual produce, naturally divides itself, it has already been ob- 
served,-'** into three parts; the rent of land, the wages of labour, 
and the profits of stock; and constitutes a revenue to three different 
orders of people; to those who live by rent, to who live by 
w'ages, and to those who live by profit.jThese are the three great, 
original and constituent orders of every civilized society, from 
whose revenue that of every other order is ultimately derived. 

The interest of the first of those three great orders, it appears 
from what has been just now said, is strictly and inseparably con- 
nected with the general interest of the society. Whatever either pro- 

The opporite of this is stated on p. 318 below. 

“’Above, p. 52. 


motes or obstructs the one, necessarily promotes or obstructs the land 
other. 'When the public deliberates concerning any regulation of 
commerce or police, the proprietors of land never can mislead it, with 
with a view to promote the interest of their own particular order ; at 
least, if they have any tolerable knowledge of that interest. They tj,, 
are, indeed, too often defective in this tolerable knowledge. They sociei 
are the only one of the three orders whose revenue costs them neith- 
er labour nor care, but comes to them, as it were, of its own accord, 
and independent of any plan or project of their own. That indo- 
lence, which is the natural effect of the ease and security of their sit- 
uation, renders them too often, not only ignorant, but incapable of 
that application of mind which is necessary in order to foresee and 
understand the consequences of any public regulation: 

The interest of the second order, that of those who live by wages. So ab 
is as strictly connected with the interest of the society as that of the 
first. The wages of the labourer, it has already been shewn,^2o 
never so high as when the demand for labour is continually rising, wage: 
or when the quantity employed is every year increasing consider- 
ably. When this real wealth of the society becomes stationary, his 
wages are soon reduced to what is barely enough to enable him to 
bring up a family, or to continue the race of labourers. When the 
society declines, they fall even below this. The order of proprietors 
may, perhaps, gain more by the prosperity of the society, than that 
of labourers: but there is no order that suffers so cruelly from its 
decline. But though the interest of the labourer is strictly connected 
with that of the society, he is incapable either of comprehending 
that interest, or of understanding its connexion with his own. His 
condition leaves him no time to receive the necessary information, 
and his education and habits are commonly such as to render him 
unfit to judge even though he was fully informed. In the public de- 
liberations, therefore, his voice is little heard and less regarded, ex- 
cept upon some particular occasions, when his clamour is animated, 
set on, and supported by his employers, not for his, but their own 
particular purposes. 

His employers constitute the third order, that of those who live ih 
by profit. It is the stock that is employed for the sake of profit, 
which puts into motion the greater part of the useful labour of livcbj 
every society. The plans and projects of the employers of stock reg- 
ulate and direct all the most important operations of labour, and same c 
profit is the end proposed by all those plans and projects. But the nexior 
rate of profit does not, like rent and wages, rise with the prosperity, 
and fall with the declension, of the society. On the contrary, it is fnterei 
“Above, pp. 69-71. 

2S0 the wealth of nations 

naturally low in rich, and high in poor countries, and it is always 
highest in the countries which are going fastest to ruin. The interest 
of this third order, therefore, has not the same connexion with the 
general interest of the society as that of the other two. Merchants 
and master manufacturers are, in this order, the two classes of people 
who commonly employ the largest capitals, and who by their wealth 
draw to themselves the greatest share of the public consideration. 
As during their whole lives they are engaged in plans and projects, 
they have frequently more acuteness of understanding than the 
greater part of country gentlemen. As their thoughts, however, are 
commonly exercised rather about the interest of their own particu- 
lar branch of business, than about that of the society, their judg- 
ment, even when given with the greatest candour (which it has not 
been upon every occasion), is much more to be depended upon with 
regard to the former of those two objects, than with regard to the lat- 
ter. Their superiority over the country gentleman is, not so much in 
their knowledge of the public interest, as in their having a better 
knowledge of their own interest than he has of his. It is by this su- 
perior knowledge of their own interest that they have frequently 
imposed upon his generosity, and persuaded him to give up both his 
own interest and that of the public, from a very simple but honest 
conviction, that their interest, and not his, was the interest of the 
public. The interest of the dealers, however, in any particular 
branch of trade or manufactures, is always in some respects differ- 
ent from, and even opposite to, that of the public. (To widen the 
market and to narrow the competition, is always the interest of the 
dealers. To widen the market may frequently be agreeable enough 
to the interest of the public; but to narrow the competition must al- 
ways be against it, and can serve only to enable the dealers, by rais- 
ing their profits above what they naturally would be, to levy, for 
their own benefit, an absurd tax upon the rest of their fellow-citi- 
zens. The proposal of any new law or regulation of commerce which 
comes from this order, ought alwa)rs to be listened to with great pre- 
caution, and ought never to be adopted till after having been long 
and carefully examined, not only with the most scrupulous, but 
with the most suspicious attention. It comes from an order of men, 
whose interest is never exactly the same with that of the public, who 
have generally an interest to deceive and even to oppress the pub- 
lic, and who accordingly have, upon many occasions, both deceived 
and oppressed it. 



Years Price of the Quarter 

XII. of Wheat each 

Average of the dif- 
ferent Prices of the 
same Year. 

The avera([e Price of 
each Year in Money 
of the present 


d. £. 












— 12 — 
— 12 — 

— 13 4 

— 15 — 

— 12 — 

— 3 4 

— 2 — 

— 2 — 

— 16 — 

— 13 4 

I 4 — 

I 16 — 


1 16 — 

— 10 — 

— 6 — 
— 6 — 

2 8 — 

2 — — 

3 12 — 




15 — 

16 — 
16 — 
8 — 

2 8 

16 — 

— 17 — 
5 12 — 

— 94 

2 II — 
16 16 — 

I 8 — 

Total, 35 9 3 


Average Price, 2 19 ij 

~^As is explained above, p. 185, the prices from 1202 to 1597 are collected 
from Fleetwood {Chronicon Predosum, 1707, pp. 77-124), and from 1398 to 
1601 they are from the Eton College account vidthout any reduction for the 
size of the Windsor quarter or the quality of the wheat, and consequently 
identical with those given in the table on p. 256 below, as to which see note. 

““ In the reduction of the ancient money to the eighteenth century standard 
the table in Martin Folkcs (Table of English Silver Coins, 1745, p. 142) ap- 
pears to have begn followed. Approximate figures are aimed at (e.g., the factor 
3 docs duty both for 2'9od and 2'87i), and the crroi is not always uniform, 
e.g., between 1464 and 1497 some of the sums appear to have been multiplied 
by the approximate i^and others by the exact i'55, 



The Average Price of 

Years Price of the Quarter Average of the dif- each Year in Money 
of Wheat each ferent Prices of the of the present 
Year. same Year. Times. 

“This should be ss. 7jd. The mistake is evidently due to the 3s. 4.d. be- 
longing to the year 1287 having been erroneously added in. 

’“Sic in all editions. More convenient to the unpractised eye in ad(hng up 
than “}.” 

‘‘And sometime xxs. as H. Knighton." — Fleetwood, Chronicon Preciosum, 
|). S’. 

~'’Miscopied: it is I2 13s. 4d. in Fleetwood, op. cit., p. 92. 





Price of the Quarter 
of Wheat each 

Average of the dif- 
ferent Prices of the 
same Year. 

The average Price of 
each Year in Money 
of the present 


£. s. d. 
— 9 — 

£. s. d. 

£. r. d. 

I 7 — 


— 3 — 

— — — 

— S 2 


I 6 S 

— — — 



— 2 — 

^ — 

— 4 8 


— — — 

I IS — 


12 — 

2 p 


— 4 — 

— — — 

— 9 4 


— 2 — 

— — — 

- 4 8 


f— 13 4] 

i— 14 — 

— 14 S 

I 13 7 


1- 16 -j 

— 16 — 

1 17 4 


/- 4 4 i 
\ — 3 4 


— $ 10 

- 8 It 


— 16 — 

1 „ 

I 12 — 

Total, IS 9 4 

Average Price, 1 s pi 


£. r. d. 

— 8 — 

£. s. d. 

£. s. d. 

— 16 — 


— 4 — 

— — — 

— 8 — 



— — — 

2 13 4 

I 43 S 

— — — 

— 10 8 




2 6 8 


— — — 

2 8 — 


4 4 \ 

1 — 4 — J 

— 4 2 

- 8 4 

I 44 S 

— 4 6 

— — — 

— 9 — 


— 8 — 

— — — 



— 6 8 

— — — 

— 13 4 


— , s — 

— — — 



- 8 - 

— — — 


Total, 12 1$ 4 

Average Price, i 1 si 

“Obviously a mistake for £2 ns. 4d. 





Price of the Quarter 
of Wheat each 

Average of the dif- 
ferent Prices of the 
same Year. 

The average Price of 
each Year in Money 
of the present 


£. s. d. 

— 3 4 

£. d. 

£. r. d. 

— 10 8 

14 SS 

— 12 

— — — 

— 2 4 


- 7 8 

— — — 

— 15 4 


— s — 

— — — 

— 10 — 


— 8 — 

— — _ 

— 16 — 


{- 1 g} 

— I 10 

- 3 8 


— 6 8 

_ _ — 

— 10 — 


I 4 — 

— — — 

I t 7 — 


— 14 8 

— — — 

12 — 

1 + 9 + 

— 4 — 

— — — 

— 6 — 

IB 3 

— 3 4 

— — — 

— s — 



— — — 

r rr — 

Total, 89 — 
Average Price, — 14 i 


























































I 3 S 4 





























1 - 








8 J 

i a 

































Price of the Quarter 
of Wheat eadi 

Average of the dif- 
ferent Prices of the 
same Year. 

The average Price of 
each Year in Money 
of the present ' 

£. s, d. 

£. s. d. 

£. s d. 


— 8 — 

— — — 

— 8 — 


— 8 — 

— — — 

— 8 — 

/ 2 16 — \ 

IS 74 

2 — — 

2 — — 


3 4 — 

— — — 

3 4 — 


2 16 — 

— — — 

2 16 — 

IS 9 S 

2 13 — 

— — — 

2 13 — 

tS 96 

r 4 , 

— — — 

4 — — 


{ i - =} 

4 12 — 

4 12 — 


2 16 8 

_ _ __ 

2 16 8 


I 19 2 

^ ^ 

I 19 2 


I 17 8 

— — — 

I 17 8 


I 14 

— — — 

I 14 10 

Total, 2S Q 4 

Average Price, 2 7 5^*®* 

®”Miscopied: it is ii 13s. 41I. in Fleetwood, Chronicon Preciostm, p. 123. 
“See p. 251, note 221. 

“ Eds. I and 2 read £2 4s. 9|'d., the 89s. left over after dividing the pousck 
having been inadvertently divided by to instead of by 12. 



Prices 0 Ihe Quarter of nine Bushels of the best or highest priced Wheat at Windsor 
Maiket. on Lady-Day and Michaelmas, from lygy to 1^64, both inclusive; 
the Price cf each Year being the Medium between the highest Prices of those 
Two Marhet-days.^^ 


























3 . 



























































































































































- — 




































The list of prices, but not the diviaon into periods, is apparently copied 
from Charles Smith (Tracts on the Com Trade, 17661 PP- 97‘i02, cp. pp. 43, 
104), who, however, states that it had been previously published, p. 96. 

RENT OF land: concliJsion 


Wheat per quarter. 




d . 


— 2 




— 2 



i 639 > 

— 2 




— 2 




— 2 



164a, I 
ilJ 43 . ! 






the act 

0 0 







— 2 




— 3 




— 4 




— 4 




— 3 




- 3 




— 2 




— 1 




— I 




— 1 




— 2 




— 2 




— 3 




— 3 




— 2 




— 3 





— 3 



— 2 




— 2 




— 2 




— I 




— 1 





— 2 



— 2 




— 2 

Carryover, 79 





Wheat per quarter. 


Brought over, 





d . 























































































































































fc)iS3 I 8 

2 II o| 



thb! wealth 

Wheat per quarter. 
£. s . d . I 


Wheat per quatrer. 
Years £. s. d . 







over, 69 









— I 










— 2 








— 2 









— I 









— I 









— I 









— 2 









— 2 









— I 








> 743 . 

— I 








> 744 . 

— I 








> 745 . 

— I 









— I 








> 747 . 

— I 









— • I 








> 749 . 

— I 








— 1 








> 7 Si. 

— . I 








> 752 , 

^ 2 








> 733 , 

— 2 








> 754 . 

— X 








> 755 . 

— I 








— 2 








> 757 . 

— 3 









— 2 








> 759 , 

— I 










— I 








— I 








— I 









— 2 









— 2 








Carryover, fig 








Wheat per quarter. 
£. j. d . 


2 0 6 is”* 

Wheat per quarter. 
£. 4 . d . 







— 2 








> 742 , 

— I 








> 743 . 

— I 








> 744 , 

— I 








> 745 , 


— I 








— I 



1737 , 






> 747 . 

— I 








— I 








> 749 , 

— I 








> 750 . 

— I 









3 i 

This should be^. 






9 i 


Of the Nature, Accumulation, and Employment of Stock 

In that rude state of society in which there is no division of labour, In tt 
in which exchanges are seldom made, and in which every man pro- 
vides every thing for himself, it is not necessary that any stock stod 
should be accumulated or stored up beforehand, in order to carry unne 
on the business of the society. Every man endeavours to supply by 
his own industry his own occasional wants as they occur. When he 
is hungry, he goes to the forest to hunt; when his coat is worn out, 
he clothes himself with the skin of the first large animal he kills; 
and when his hut begins to go to ruin, he'repairs it, as well as he can, 
with the trees and the turf that are nearest it. 

But when the division of labour has once been thoroughly intro- Divi 
duced, the produce of a man’s own labour can supply but a very 
small part of his occasional wants. The far greater part of them are 
supplied by the produce of other mens labour, which he purchases 
with the produce, or what is the same thing, with the price of the 
produce of his own. But this purchase cannot be made till such time 
as the produce of his own labour has not only been completed, but 
sold. A stock of goods of different kinds, therefore, must be stored 
up somewhere sufficient to maintain him, and to supply him with 
the materials, and tools of his work, till such time, at least, as both 
these events can be brought about. A weaver cannot apply himself 
entirely to his peculiar business, unless there is beforehand stored up 
somewhere, either in his own possession or in that of some other 
person, a stock sufficient to maintain him, and to supply him with 
the materials and tools of his work, till he has not only completed 
but sold his web. This accumulation must, evidently, be previous to 
his applying his industry for so long a time to such a peculiar 

' Lecture], p. i8i. 


lation of 
stock and 
of labour 

causes the 
of indus- 
try to 

This Book 
treats of 
the nature 
of stock, 
the ef- 
fects of 
its accu- 


As the accumulation of stock must, in the nature of things, be 
previous to the division of labour, so labour can be more and more 
subdivided^ in proportion only as stock is previously more and 
more accumulated. The quantity of materials which the same num- 
ber of people can work up, increases in a great proportion as labour 
comes to be more and more subdivided; and as the operations of 
each workman are gradually reduced to a greater degree of sim- 
plicity, a variety of new machines come to be invented for facili- 
tating and abridging those operations. As the division of labour 
advances, therefore, in order to give constant employment to an 
equal number of workmen, an equal stock of provisions, and a 
greater stock of materials and tools than what would have been 
necessary in a ruder state of things, must be accumulated before- 
hand. But the number of workmen in every branch of business gen- 
erally increases with the division of labour in that branch, or rather 
it is the increase of their number which enables them to class and 
subdivide themselves in this manner. 

As the accumulation of stock is previously necessary for carry- 
ing on this great improvement in the productive powers of labour, 
so that accumulation naturally leads to this improvement. The per- 
son who employs his stock in mmntaining labour, necessarily wishes 
to employ it in such a manner as to produce as great a quantity of 
work as possible. He endeavours, therefore, both to m^e among 
his workmen the most proper distribution of employment, and to 
furnish them with the best machines W'hich he can either invent or 
afford to purchase. His abilities in both these respects are generally 
in proportion to the extent of his stock, or to the number of people 
whom it can employ. The quantity of industry, therefore, not only 
increases in every country with the increase of the stock which em- 
ploys it, but, in consequence of that increase, the same quantity of 
industry produces a much greater quantity of work. 

Such are in general the effects of the increase of stock upon in- 
dustry and its productive powers. 

In the following book I have endeavoured to explain the nature 
of stock, the effects of its accumulation into capitals of different 
kinds, and the effects of the different employments of those capitals. 
This book is divided into five chapters. In the first chapter, I have 
endeavoured to show what are the different parts or branches into 
which the stock, either of an individual, or of a great society, nat- 
urally divides itself. In the second, I have endeavoured to explain 
the nature and operation of money considered as a particular 
branch of the general stock of the society. The stock which is ac- 
’ Eds. I and 2 place the “only" here. 


cumulated into a capital, may either be employed by the person to 
whom it belongs, or it may be lent to some other person. In the third 
and fourth chapters, I have endeavoured to examine the manner in 
which it operates in both these situations. The fifth and last chapter 
treats of the different effects which the different employments of 
capital immediately produce upon the quantity both of national 
industry, and of the annual produce of land and labour. 


does Dot 
think of 
from a 

but when 
he has 
more than 
for imme- 
diate con- 
he endea- 
vours to 
derive a 

either as 

(i) circu- 


When the stock which a man possesses is no more than sufficient to 
maintain him for a few days or a few weeks, he seldom thinks of de- 
riving any revenue from it. He consumes it as sparingly as he can, 
and endeavours by his labour to acquire something which may sup- 
ply its place before it be consumed altogether. His revenue is, in 
this case, derived from his labour only. This is the state of the 
greater part of the labouring poor in all countries. 

But when he possesses stock sufficient to maintain him for 
months or years, he naturally endeavours to derive a revenue from 
the greater part of it; reserving only so much for his immediate 
consumption as may maintain him till this revenue begins to come 
in. His whole stock, therefore, is distinguished into two parts. That 
part which, he expects, is to afford him this revenue, is called his 
capital. The other is that whicli supplies his immediate consump- 
tion; and which consists either, first, in that portion of his whole 
stock which was originally reserved for this purpose; or, secondly, 
in his revenue, from whatever source derived, as it gradually comes 
in; or, thirdly, in such things as had been purchased by either of 
these in former years, and which are not yet entirely consumed; 
such as a stock of clothes, household furniture, and the like. In one, 
or other, nr all of these three articles, consists the stock which men 
commonly reserve for their own immediate consumption. 

There are two different ways in which a capital may be employed 
so as to yield a revenue or profit to its employer. 

First, it may be employed in raising, manufacturing, or purchas- 
ing goods, and selling them again with a profit. The capital em- 
ployed in this manner yields no revenue or profit to its employer, 
while it either remains in his possession, or continues in the same 
shape. The goods of the merchant yield him no revenue or profit 
till he sells them for money, and the money yields him as little till 
it is again exchanged for goods. His capital 'is continually going 
from him in one shape, and returning to him in another, and it is 



only by means of such circulation, or successive exchanges, that it 
can yield him any profit. Such capitals, therefore, may very prop- 
erly be called circulating capitals. 

Secondly, it may be employed in the improvement of land, in the 
purchase of useful machines and instruments of trade, or in such- 
like things as yield a revenue or profit without changing masters, 
or circulating any further. Such capitals, therefore, may very prop- 
erly be called fixed capitals. 

Different occupations require very different proportions between 
the fixed and circulating capitals employed in them. 

The capital of a merchant, for example, is altogether a circulat- 
ing capital. He has occasion for no machines or instruments of 
trade, unless his shop, or warehouse, be considered as such. 

Some part of the capital of every master artificer or manufac- 
turer must be fixed in the instruments of his trade. This part, how- 
ever, is very small in some, and very great in others. A master tay- 
lor requires no other instruments of trade but a parcel of needles. 
Those of the master shoemaker are a little, though but a very little, 
more expensive. Those of the weaver rise a good deal above those of 
the shoemaker. The far greater part of the capital of all such mas- 
ter artificers, however, is circulated, either in the wages of their 
workmen, or in the price of their materials, and repaid with a prof- 
it by the price of the work. 

In other works a much greater fixed capital is required. In a 
great iron-work, for example, the furnace for melting the ore, the 
forge, the slitt-mill, are instruments of trade which cannot be 
erected without a very great expence. In coal-works, and mines of 
every kind, the machinery necessary both for drawing out the 
water and for other purposes, is frequently still more expensive. 

That part of the capital of the farmer which is employed in the 
instruments of agriculture is a fixed ; that which is employed in the 
wages and maintenance of his labouring servants, is a circulating 
capital. He makes a profit of the one by keeping it in his own pos- 
session, and of the other by parting with it. The price or value of 
his labouring cattle is a fixed capital in the same manner as that of 
the instruments of husbandry: Their maintenance is a circulating 
capital in the same manner as that of the labouring servants. The 
farmer makes his profit by keeping the labouring cattle, and by 
parting with their maintenance. Both the price and the mainte- 
nance of the cattle which are bought in and fattened, not for la- 
bour, but for sale, are a circulating capital. The farmer makes his 
profit by parting with them. A flock of sheep or a herd of cattle 
that, in a breeding country, is bought in, neither for labour, nor 

fixed ca 

tions ol 
fixed ar 
ing capi 
are re- 
quired i 

The atock 
uf a so- 
ciety is 
divided in 
the same 
way into 

(i) the 
ior imme- 
diate con- 


for sale, but in order to make a profit by their wool, by their milk, 
and by their increase, is a fixed capital. The profit is made by 
keeping them. Their maintenance is a circulating capital. The prof- 
it is made by parting with it; and it comes back with both its own 
profit, and the profit upon the whole price of the cattle, in the 
price of the wool, the milk, and the increase. The whole value of 
the seed too is properly a fixed capital. Though it goes backwards 
and forwards between the ground and the granary, it never changes 
masters, and therefore does not properly circulate. The farmer 
makes his profit, not by its sale, but by its increase. 

The general stock of any country or society is the same with that 
of all its inhabitants or members, and therefore naturally divides 
itself into the same three portions, each of which has a distinct 
function or office. 

The First, is that portion which is reserved for immediate con- 
sumption, and of which the characteristic is that it affords no rev- 
enue or profit. It consists in the stock of food, clothes, household 
furniture, &c., which have been purchased by their proper consum- 
ers, but which are not yet entirely consumed. The whole stock of 
mere dwelling houses too subsisting at any one time in the country, 
make a part of this first portion. The stock that is laid out in a 
house, if it is to be the dwelling-house of the proprietor, ceases from 
that moment to serve in the function of a capital, or to afford any 
revenue to its owner. A dwelling-house, as such, contributes noth- 
ing to the revenue of its inhabitant; and though it is, no doubt, ex- 
tremely useful to him, it is as his clothes and household furniture 
are useful to him, which, however, make a part of his expence, and 
not of his revenue. If it is to be let to a tenant for rent, as the house 
itself can produce nothing, * the tenant must always pay the rent 
out of some other revenue which he derives either from labour, or 
stock, or land. Though a house, therefore, may yield a revenue to 
its proprietor, and thereby serve in the function of a capital to him, 
it cannot yield any to the public, nor serve in the function of a cap- 
ital to it, and the revenue of the whole body of the people can never 
be in the smallest degree increased by it. Clothes, and household 
furniture, in the same manner, sometimes yield a revenue, and 
thereby serve in the function of a capital to particular persons. In 
countries where masquerades are common, it is a trade to let out 

^ “Ce n'est pas cette mais m qul produit cllc-meme ces mille francs. . . . Le 
loyer d’unc maison n’est point pour la sodeti une augmentation de revenu, 
une creation de richesses nouvclles, il n’est au contraire qu’un mouvement, 
qu’un changement de main.” — ^Mercier de la Riviire, L'Ordre naturel el es- 
mitiel des Sodelis poUliques, i2mo cd., 1767, vol, ii., p. 123, or in Daire's 
Pliydocrates, p. 487. 

DIVISION OF stock’ 265 

masquerade dresses for a night. Upholsterers frequently let furni- 
ture by the month or by the year. Undertakers let the furniture of 
funerals by the day and by the week. Many people let furnished’ 
houses, and get a rent, not only for the use of the house, but for 
that of the furniture. The revenue, however, which is derived from 
such things, must always be ultimately drawn from some other 
source of revenue. Of all parts of the stock, either of an individual, 
or of a societjr, reserved for immediate consumption, what is laid 
out in houses is most slowly consumed. A stock of clothes may last 
several years: a stock of furniture half a century or a century: but 
a stock of houses, well built and properly taken care of, may last 
many centuries. Though the period of their total consumption, 
however, is more distant, they are still as really a stock reserved 
for immediate consumption as either clothes or household 

The Second of the three portions into which the general stock of 
the society divides itself, is the fixed capital; of which the charac- 
teristic is, that it affords a revenue or profit without circulating or 
changing masters. It consists chiefly of the four following articles: 

First, of all useful machines and instruments of trade which fa- 
cilitate and abridge labour: 

Secondly, of all those profitable buildings which are the means of 
procuring a revenue, not only to their proprietor who lets them for 
a rent, but to the person who possesses them and pays that rent for 
them ; such as shops, warehouses, workhouses, farmhouses, with all 
their necessary buildings; stables, granaries, &c. These are very 
different from mere dwelling houses. They are a sort of instruments 
of trade, and may be considered in the same light: 

Thirdly, of the improvements of land, of what has been profit- 
ably laid out in clearing, draining, enclosing, manuring, and reduc- 
ing it into the condition most proper for tillage and culture. An im- 
proved farm may very justly be regarded in the same liglit as those 
useful machines which facilitate and abridge labour, and by 
means of which, an equal circulating capital can afford a much 
greater revenue to its employer. .An improved farm is equally ad- 
vantageous and more durable than any of those machines, fre- 
quently requiring no other repairs than the most profitable appli- 
cation of the fanner’s capital employed in cultivating it: 

Fourthly, of the acquired and useful abilities of all the inhabi- 
tants or members of the society. The acquisition of such talents, 
by the maintenance of the acquirer during his education, study, or 
apprenticeship, always costs a real expence, which is a capital fixed 
and realized, as it were, in his person. Those talents, as they make 

(2) the 
&;ed ca 
tal, whi 

(а) use 

( б ) pro 

(c) im- 
ments 0 

and (d) 
and use 
ful abili 

and ( 3 ) 
the circu- 
consists of 

(s) the 

(6) the 
stock of 
in the posr- 
session of 
the sellers, 

(c) the 
of clothes, 
and build- 

and (d) 
work in 
the hands 
of the 
or manu- 

The last 
parts of 
the circu- 
capital ace 
from it. 


a part of hb fortune, so do they likewbe of that of the society to 
which he belongs. The improved dexterity of a workman may be 
'considered in the same light as a machine or instrument of trade 
which facilitates and abridges labour, and which, though it costs a 
certain expence, repays that expence with a profit.^ 

The Third and last of the three portions into which the general 
stock of the society naturally divides itself, is the circulating capi- 
tal; of which the characterbtic b, that it affords a revenue only by 
circulating or changing masters. It is composed likewise of four 

First, of the money by means of which all the other three are cir- 
culated and distributed to their proper consumers 

Secondly, of the stock of provisions which are in the possession 
of the butcher, the graaier, the farmer, the corn-merchant, the 
brewer, &c. and from the sale of which they expect to derive a 

Thirdly, of the materials, whether altogether rude, or more or 
less manufactured, of clothes, furniture and building, which are not 
yet made up into any of those three shapes, but which remain in 
the hands of the growers, the manufacturers, the mercers, and 
drapers, the timber-merchants, the carpenters and joiners, the 
brick-makers, &c. 

Fourthly, and lastly, of the work which is made up and com- 
pleted, but which is still in the hands of the merchant or manufac- 
turer, and not yet disposed of or distributed to the proper con- 
sumers; such as the finished work which we frequently find ready- 
made in the shops of the smith, the cabinet-maker, the goldsmith, 
the jeweller, the china-merchant, &c. The circulating capital con- 
sists in this manner, of the provisions, materials, and finished work 
of all kinds that are in the hands of their respective dealers, and of 
the money that is necessary for circulating and distributing them 
to those who are finally to use, or to consume them. 

Of these four parts three, provisions, materials, and finished 
work, are, either annually, or in a longer or shorter period, regu- 
larly withdrawn from it, and placed either in the fixed capital or 
in the stock reserved for immediate consumption. 

Every fixed capital is both originally derived from, and requires 
to be continually supported by a circulating capital. All useful ma- 
chines and instruments of trade are originally derived from a cir- 
culating capital, which furnbhes the materials of which they are 

“ But in bk. i., ch. x., the remuneration of improved dexterity is treated as 

’ Ed. I reads “users and consumers” here and eleven lines lower. 

DIVISION OF stock’ 267 

made, and the maintenance of the workmen who make them. They 
require too a capital of the same kind to keep them in constant 

No fixed capital can yield any revenue but by means of a circu- 
lating capital. The most useful machines and instruments of trade 
will produce nothing without the circulating capital which affords 
the materials they are employed upon, and the maintenance of the 
workmen who employ them. Land, hov/ever improved, will yield no 
revenue without a circulating capital, which maintains the la- 
bourers who cultivate and collect its produce. 

To maintain and augment the stock which may be reserved for 
.immediate consumption, is the sole end and purpose both of the 
fixed and circulating capitals. It is this stock which feeds, clothes, 
and lodges the people. Their riches or poverty depends upon the 
abundant or sparing supplies which those two capitals can afford to 
the stock reserved for immediate consumption. 

So great a part of the circulating capital being continually with- 
drawn from it, in order to he placed in the other two branches of 
the general stock of the society; it must in its turn require contin- 
ual supplies, without which it would soon cease to exist. These sup- 
plies are principally drawn from three sources, the produce of land, 
of mines, and of fisheries. These afford continual supplies of pro- 
visions and materials, of which part is afterwards wrought up into 
finished work, and by which are replaced the provisions, materials 
and finished work continually withdrawn from the circulating capi- 
tal. From mines too is drawn what is necessary for maintaining and 
augmenting that part of it which consists in money. For though, in 
the ordinary course of business, this part is not, like the other three, 
necessarily withdrawn from it, in order to be placed in the other 
two branches of the general stock of the society, it must, however, 
like all other things, be wasted and worn out at last, and sometimes 
too be either lost or sent abroad, and must, therefore, require con- 
tinual, though, no doubt, much smaller supplies. 

Land, mines^ and fisheries, require all both a fixed and a circu- 
lating capital to cultivate them: and their produce replaces with a 
profit, not only those capitals, but all the others in the society. 
Thus the farmer annually replaces to the manufacturer the provi- 
sions which he had consumed and the materials which he had 
wrought up the year before; and the manufacturer replaces to the 
farmer the finished work which he had wasted and worn out in the 
same time. This is the real exchange that is aimually made be- 
tween those two orders of people, though it seldom happens that 
the rude produce of the one and the manufactured produce of the 


fixed ca 





by a cii 



and car 
not yiel 
out it. 

of both 
fixed ar 
ing capi 
tal is to 
and au( 
ment tl 
other p, 
of the 

kept up 
by the 
of land, 
and fish 

which r 



and cirt 





and, when 
their fer- 
tility is 
yield pro- 
duce pro- 
ate to the 

there is 
ali stock 
is em- 
ployed in 
one or 
other of 
the three 

stock is 
and con- 


Other, are directly bartered for one another; because it seldom hap- 
_pens that the fanner sells his corn and his cattle, his flax and his 
•wool, to the very same person of whom he chuses to purchase the 
clothes, furniture, and instruments of trade which he wants. He 
sells, therefore, his rude produce for money, with which he can pur- 
chase, wherever it is to be had, the manufactured produce he has 
occasion for. Land even replaces, in part at least, the capitals with 
which fisheries and mines are cultivated. It is the produce of land 
which draws the fish from the waters; and it is the produce of the 
surface of the earth which extracts the minerals from its bowels. 

The produce of land, mines, and fisheries, when their natural 
fertility is equal, is in proportion to the extent and proper applica- 
tion of the capitals employed about them. When the capitals are 
equal and equally well applied, it is in proportion to their natural 

In all countries where there is tolerable security, every man of 
common understanding will endeavour to employ whatever stock he 
can command, in procuring either present enjoyment or future prof- 
it. If it is employed in procuring present enjoyment, it is a stock 
reserved for immediate consumption. If it is employed in procuring 
future profit, it must procure this profit either by staying with him, 
or by going from him. In the one case it is a fixed, in the other it 
is a circulating capital. A man must be perfectly crazy who, where 
there is tolerable security, does not employ all the stock which he 
commands, whether it be his own or borrowed of other people, in 
some one or other of those three ways. 

In those unfortunate countries, indeed, where men are continu- 
ally afraid of the violence of their superiors, they frequently bury 
and conceal a great part of their stock, in order to have it always at 
hand to carry with them to some place of safety, in case of their 
being threatened with any of those disasters to which they con- 
sider themselves as at all times e.xposed. This is said to be a com- 
mon practice in Turkey, in Indostan, and, I believe, in most other 
governments of Asia. It seems to have been a common practice 
among our ancestors during the violence of the feudal government. 
Treasure-trove was in those times considered as no contemptible 
part of the revenue of the greatest sovereigns in Europe. It consist- 
ed in such treasure as was found concealed in the earth, and to 
which no particular person could prove any right. This was re- 
garded in those times as so important an object, that it was always 
considered as belonging to the sovereign, and neither to the finder 
nor to the proprietor of the land, unless the right to it had been 
conveyed to the latter by an express clause in his charter. It was 


put upon the same footing with gold and silver mines, whioh, with- 
out a special clause in the charter, were never supposed to be com- 
prehended in the general grant of the lands, though mines of lead, ’ 
copper, tin, and coal were, as things of smaller consequence. 


Prices are 


into three 




and rent, 

and the 
whole an- 
nual pro- 
duce is di- 
vided into 
the same 

but we 
may dis- 
gross and 
net reve- 

rent is the 
sum paid 
by the 


It has been shewn in the first Book, that the price of the greater 
part of commodities resolves itself into three parts, of which one 
pays the wages of the labour, another the profits of the stock, rnd 
a third the rent of the land which had been employed in producing 
and bringing them to market; that there are, indeed, some com- 
modities of which the price is made up of two of those parts only, 
the wages of labour, and the profits of stock: and a very few in 
which it consists altogether in one, the wages of labour: but that 
the price of every commodity necessarily resolves itself into some 
■ one, or other, or all of these three parts; every part of it which goes 
neither to rent nor to wages, being necessarily profit to somebody. 

Since this is the case, it has been observed, with regard to every 
particular commodity, taken separately; it must be so with regard 
to all the commodities which compose the whole annual produce of 
the land and labour of every country, taken complexly. The whole 
price or exchangeable value of that annual produce, must resdve 
itself into the same three parts, and be parcelled out among the 
different inhabitants of the country, either as the wages of their 
labour, the profits of their stock, or the rent of their land. 

But though the whole value of the annual produce of the land 
and labour of every country is thus divided among and constitutes 
a revenue to its different inhabitants; yet as in the rent of a private 
estate we distinguish between ihe gross rent and the neat rent, so 
may we likewise in the revenue of all the inhabitants of a great 

The gross rent of a private estate comprehends whatever is paid 
by the farmer; the neat rent, what remains free to the landlord, 
after deducting the expence of management, of repairs, and all 
other necessary charges; or what, without hurting his estate, he can 


. MONEY 271 

afford to place in his stock reserved for immediate consumption, or 
to spend upon his table, equipage, the ornaments of his house and ^ 
furniture, his private enjoyments and amusements. His real wealth 
is in proportion, not to his gross, but to his ne^t rent. 

The gross revenue of all the inhabitants of a great country, com- 
prehends the whole annual produce of their land and labour; the 
neat revenue, what remains free to them after deducting the ex- 
pence of maintaining; first, their fixed; and, secondly, their cir- 
culating capital; or what, without encroaching upon their capital, 
they can place in their stock reserved for immediate consumption, 
or spend upon their subsistence, conveniences, and amusements. 
Their real wealth too is in proportion, not to their gross, but to 
their neat revenue. 

The whole expence of maintaining the fixed capital, must evi- 
dently be excluded from the neat revenue of the society. Neither 
the materials necessary for supporting their useful machines and 
instruments of trade, their profitable buildings, &c. nor the produce 
of the labour necessary for fashioning those materials into the 
proper form, can ever make any part of it. The price of that labour 
may indeed make a part of it; as the rvorkmen so employed may 
place the whole value of their wages in their stock reserved for im- 
mediate consumption. But in other sorts of labour, both the price 
and the produce go to this stock, the price to that of the workmen, 
the produce to that of other people, whose subsistence, conven- 
iencies, and amusements, are augmented by the labour of those 

The intention of the fixed capital is to increase the productive 
powers of labour, or to enable the same number of labourers to per- 
form a much greater quantity of work. In a farm where ail the 
necessary buildings, fences, drains, communications, &c. are in the 
most perfect good order, the same number of labourers and labour- 
ing cattle will raise a much greater produce, than in one of equal 
extent and equally good ground, but not furnished with equal con- 
veniencies. In «manufactures the same number of hands, assisted 
with the best machinery, wiil work up a much greater quantity of 
goods than with more imperfect instruments of trade. The expence 
which is properly laid out upon a fixed capital of any kbd, is always 
repaid with great profit, and increases the annual produce by a 
much greater value than that of the support which such improve- 
ments require. This support, however, still requires a certain por- 
tion of that produce. A certain quantity of materials, and the labour 
of a certain number of workmen, both of which might have been 
immediately employed to augment the food, clothing and lodging. 

net rent 
what is 
left free 
to the 

Gross re 
venue is 
the who’ 
net reve 
nue wha 
is left fr( 
after de- 
of fixed 
and circi 


whole ei 
pence oi 
the fixet 
must be 

since thi 
only ob- 
ject of t 
fixed ca] 
the pro- 

and any 
ing or 
tion is re- 
garded as 
a good. 

The cost 
of main- 
the fixed 
capital is 
like the 
cost of 
repairs on 
an estate, 

but the 
expence of 
ing the 
last three 
parts of 
the circu- 
capital is 
not to hr 


the subsistence and conveniencies of the society, are thus diverted 
, to another employment, highly advantageous indeed, but still dif- 
ferent from this one. It is upon this account that all such improve- 
ments in mechanics, as enable the same number of workmen to 
perform an equal quantity of work with cheaper and simpler ma- 
chinery than had been usual before, are always regarded as advan- 
tageous to every society. A certain quantity of materials, and the 
labour of a certain number of w'orkmen, which had before been 
employed in supporting a more complex and expensive machinery, 
can afterwards be applied to augment the quantity of work which 
that or any other machinery is useful only for performing. The un- 
dertaker of some great manufactory who employs a thousand 
a-year in the maintenance of his machinery, if he can reduce this 
expence to five hundred, will naturally ^ employ the other five hun- 
dred in purchasing an additional quantity of materials to be 
wrought up by an additional number of workmen. The quantity of 
that work, therefore, which his machinery was useful only for per- 
forming, will naturally be augmented, and with it all the advan- 
tage and conveniency which the society can derive from that work. 

The e.xpence of maintaining the fixed capital in a great country, 
may very properly be compared to that of repairs in a private 
estate. The expence of repairs may frequently be necessary for sup- 
porting the produce of the estate, and consequently both the gross 
and the neat rent of the landlord. When by a more proper direction, 
however, it can be diminished without occasioning any diminution 
of produce, the gioss rent remains at least the same as before, and 
the neat rent is necessarily augmented. 

But though the whole e.xpence of maintaining the fixed capital is 
thus necessarily excluded from the neat revenue of the society, it is 
not the same case with that of maintaining the circulating capital. 
Of the four parts of which this latter capital is composed, money, 
provisions, materials, and finished work, the three last, it has al- 
ready been observed, are regularly withdrawn from it, and placed 
either in the fixed capital of the society, or in their stock reserved 
for immediate consumption. What ever portion of thos e consum able 

S ' 5 is not^mployed in maintaTm ngJ be form er, goes all tq_the. 

•Tan^ Uiates a part of the neat revenue of th^sqciety,^The 

maintenance of those three parts of the circulating capital, there- 
fore, withdraws no portion of the annual produce from the neat 
revenue of the society, besides what is necessary for maintaining 
the fixed capital. 

‘ There seems no reason whatever for supposing that this is necessarily the 
“natural" action. 



The circulating capital of a society is in this respect different 
from that of an individual. That of an individual is totally exclud- 
ed from making any part of his neat revenue, which must consist' 
altogether in his profits. But though the circulating capital of every 
individual makes a part of that of the society to which he belongs, 
it is not upon that account totally excluded from making a part 
likewise of their neat revenue. Though the whole goods in a mer- 
chant’s shop must by no means be placed in his own stock reserved 
for immediate consumption, they may in that of other people, who, 
from a revenue defined from other funds, may regularly replace 
their value to him, together with its profits, without occasioning 
any diminution either of his capital or of theirs.^ 

Money, therefore, is the only part of the circulating capital of a 
society, of which the maintenance can occasion any diminution in 
their neat revenue. 

The fixed capital, and that part of the circulating capital which 
'’consists in money, so far as they affect the revenue of the society, 
bear a very great resemblance to one another. 

First, as those machines and instruments of trade, &c. require a 
certain expence, first to erect them, and afterwards to support them, 
both which expences, though they make a part of the gross, are de- 
ductions from the neat revenue of the society; so the stock of 
money which circulates in any country must require a certain ex- 
pence, first to collect it, and afterwards to support it, both which 
expences, though they make a part of the gross, are, in the same 
manner, deductions from the neat revenue of the society. A certain 
quantity of very valuable materials, gold and silver, and of very 
curious labour, instead of augmenting the stock reserved for im- 
mediate consumption, the subsistence, conveniencies, and amuse- 
ments of individuals, is employed in supporting that great but ex- 
pensive instrument of commerce, by means of which every indi- 
vidual in the society has his subsistence, conveniencies, and amuse- 
ments, regularly distributed to him in their proper proportion. 

Secondly, as, the machines and instruments of trade, &c. which 
compose the fixed capital either of an individual or of a society, 
make no part either of the gross or of the neat revenue of either; so 
money, by means of which the whole revenue of the society is regu- 
larly distributed among all its different members, makes itself no 
part of that revenue. The great wheel of circulation is altogether 

’ In this paragraph the capital or stock of goods is confused with the goods 
themselves. The goods of which the stock consists may become revenue, but 
the stock itself cannot. The maintenance of a stock, even of perishable and 
consumable goods, does form a charge on the labour of the society. 

la ting 
the so- 
ciety bt 
ing diffi 
ent in t 
from th 
of an in 
di vidua 



ance of 



must b( 




the fiiei 

(i) the 
ance of 
the stoc 
of mom 
is part c 
the gros 
but not 
the net 

and (a) 

forms n 
part of 
the net 

It only 
appears to 
do so 
from the 
of lan- 

sums of 
often used 
to indi- 
cate the 
able as 
well as 
the coins 

We must 
not add 
both to- 

If a man 
has a 
guinea a 
week he 
enjoys a 
worth of 


different from the goods which are circulated by means of it. The 
revenue of the society consists altogether in those goods, and not 
in the wheel which circulates them. In computing either the gross or 
the neat revenue of any society, we must always, from their whole 
annual circulation of money and goods, deduct the whole value of 
the money, of which not a single farthing can ever make any part 
of either.^ 

It is the ambiguity of language only which can make this propo- 
sition appear either doubtful or paradoxical. When properly ex- 
plained and understood, it is almost self-evident. 

When we talk of any particular sum of money, we sometimes 
mean nothing but the metal pieces of which it is composed; and 
sometimes we include in our meaning some obscure reference to the 
goods which can be had in exchange for it, or to the power of pur- 
chasing which the possession of it conveys. Thus when we say, that 
the circulating money of England has been computed at eighteen 
millions, we mean only to express the amount of the metal pieces, 
which some writers have computed, or rather have supposed to cir- 
culate in that country. But when we say that a man is worth fifty or 
a hundred pounds a-year, we mean commonly to express not only 
the amount of the metal pieces which are annually paid to him, but 
the value of the goods which he can annually purchase or consume. 
We mean commonly to ascertain what is or ought to be his way of 
living, or the quantity and quality of the necessaries and conven- 
iencics of life in which he can with propriety indulge himself. 

When, by any particular sum of money, we mean not only to ex- 
press the amount of the metal pieces of which it is composed, but 
to include in its signification some obscure reference to the goods 
which can be had in exchange for them, the wealth or revenue which 
it in this case denotes, is equal only to one of the two values which 
are thus intimated somewhat ambiguously by the same word, and 
to the latter more properly than to the former, to the money's 
worth more properly than to the money. 

Thus if a guinea be the weekly pension of a particular person, he 
can in the course of the week purchase with it a certain quantity of 
subsistence, conveniencies, and amusements. In proportion as this 
quantity is great or small, so are his real riches, his real weekly 
revenue. His weekly revenue is certainly not equal both to the 
guinea, and to what can be purchased with it, but only to one or 

' If it were not for the use of the old-fashioned term “circulation" instead 
of the newer “produce,” the explanation which follows would be unnecessary. 
No one could be suspected of a desire to add all the money to the annual 


other of those two equal values; and to the latter more properly 
than to the former, to the guinea’s worth rather than to the guinea. 

If the pension of such a person was paid to him, not in gold, but 
in a weekly bill for a guinea, his revenue surely would not so prop- 
erly consist in the piece of paper, as in what he could get for it. A 
guinea may be considered as a bill for a certain quantity of neces- 
saries and conveniences upon all the tradesmen in the neighbour- 
hood. The revenue of the person to whom it is paid, does not so 
properly consist in the piece of gold, as in what he can get for it, 
or in what he can exchange it for. If it could be exchanged for noth- 
ing, it would, like a bill upon a bankrupt, be of no more value than 
the most useless piece of paper. 

Though the weekly or yearly revenue of all the different inhab- 
itants of any country, in the same manner, may be, and in reality 
frequently is paid to them in money, their real riches, however, the 
real weekly or yearly revenue of all of them taken together, must 
always be great or small in proportion to the quantity of consum- 
able goods which they can all of them purchase with this money. 
The whole revenue of all of them taken together is evidently not 
equal to both the money and the consumable goods; but only to 
one or other of those two values, and to the latter more properly 
than to the former. 

Though we frequently, therefore, express a person’s revenue by 
the metal pieces which are annually paid to him, it is because the 
amount of those pieces regulates tlie extent of his power of pur- 
chasing, or the value of the goods which he can annually afford to 
consume. We still consider his revenue as consisting in this power 
of purchasing or consuming, and not in the pieces which convey it. 

But if this is sufficiently evident even with regard to an indi- 
vidual, it is still more so with regard to a society. The amount of 
the metal pieces which arc annually paid to an individual, is often 
precisely equal to his revenue, and is upon that account th® shortest 
and best expression of its value. But the amount of the metal pieces 
which circulate in a society, can never be equal to the revenue of 
all its members. As the same guinea which pays the weekly pen- 
sion of one man to-day, may pay that of another to-morrow, and 
that of a third the day thereafter, the amount of the metal pieces 
which annually circulate in any country, must always be of much 
less value than the whole money pensions annually paid with them. 
But the power of purchasing, or ■* the goods which can successively 
be bought with the whole of those money pensions as they are suc- 
cessively paid, must always be precisely of the same value with 

cncc, &c 

and his 
real revi 
that suh 

The sair 
is true o 
all the ii 
of a cou 

The coir 
paid to i 
equal hi: 
but the 
stock of 
coin in a 
society i 
equal to 

‘ Ed. I does not contain “or.’ 

Money is 
no part of 
the reve- 
nue of the 

( 3 ) 

■laving in 
the cost 
'jf main- 
(he stock 
of money 
is an im- 

The sub- 
of paper 
for gold 
money is 
an im- 


those pensions; as must likewise be the revenue of the different per- 
sons to whom they are paid. That revenue, therefore, cannot con- 
' sist in those metal pieces, of which the amount is so much inferior 
to its value, but in the power of purchasing, in the goods which can 
successively be bought with them as they circulate from hand to 

Money, therefore, the great wheel of circulation, the great in- 
strument of commerce, like all other instruments of trade, though 
it makes a part and a very valuable part of the capital, makes no 
part of the revenue of the society to which it belongs; and though 
the metal pieces of which it is composed, in the course of their an- 
nual circulation, distribute to every man the revenue which proper- 
ly belongs to him, they make themselves no part of that revenue. 

Thirdly, and lastly, the machines and instruments of trade, &c. 
which compose the fixed capital, bear this further resemblance to 
that part of the circulating capital which consists in money; that 
as every saving in the expence of erecting and supporting those 
machines, which does not diminish the productive powers of labour, 
is an improvement of the neat revenue of the society; so every sav- 
ing in the e.xpence of collecting and supporting that part of the cir- 
culating capital which consists in money, is an improvement of 
exactly the same kind. 

It is sufficiently obvious, and it has partly too been explained 
already, in what manner ex'ery saving in the expence of supporting 
the fixed capital is an improvement of the neat revenue of the so- 
ciety. The whole capital of the undertaker of every work is neces- 
sarily divided between his fixed and his circulating capital. While 
his whole capital remains the same, the smaller the one part, the 
greater must necessarily be the other. It is the circulating capital 
which furnishes the materials and wages of labour, and puts in- 
dustry into motion. Every saving, therefore, in the expcnce of 
maintaining the fixed capital, which does not diminish the pro- 
ductive powers of labour, must increase the fund which puts indus- 
try into motion, and consequently the annual produce of land and 
labour, the real revenue of every society. 

The substitution of paper in the room of gold and silver money, 
replaces a very expensive instrument of commerce with one much 
less costly, and sometimes equally convenient. Circulation comes to 
be carried on by a new wheel, which it costs less both to erect and to 
maintain than the old one. But in what manner this operation is 
performed, and in what manner it tends to increase either the gross 
or the neat revenue of the society, is not altogether so obvious, and 
may therefore require some further explication. 



There are several different sorts of paper money; but the cir- 
culating notes of banks and bankers are the species which is best, 
known, and which seems best adapted for this purpose. 

When the people of any particular country have such confidence 
in the fortune, probity, and prudence of a particular banker, as to 
believe that he is always ready to pay upon demand such of his 
promissory notes as are likely to be at any time presented to him; 
those notes come to have the same currency as gold and silver 
money, from the confidence that such money can at any time be had 
for them. 

A particular banker lends among his customers his own promis- 
sory notes, to the extent, we shall suppose, of a hundred thousand 
pounds. As those notes serve all the purposes of money, his debtors 
pay him the same interest as if he had lent them so much money. 
This interest is the source of his gain. Though some of those notes 
are continually coming back upon him for payment, part of them 
continue to circulate for months and years together. Though he has 
generally in circulation, therefore, notes to the extent of a hundred 
thousand pounds, twenty thousand pounds in gold and silver may, 
frequently, be a sufficient provision for answering occasional de- 
mands. By this operation, therefore, tsventy thousand pounds in 
gold and silver perform all the functions which a hundred thousand 
could otherwise have performed. The same exchanges may be made, 
the same quantity of consumable goods may be circulated and dis- 
tributed to their proper consumers, by means of his promissory 
notes, to the value of a hundred thousand pounds, as by an equ^ 
value of gold and silver money. Eighty thousand pounds of gold 
and silver, therefore, can, in this manner, be spared from the cir- 
culation of the country; and if different operations of the same 
kind should, at the same time, be carried on by many different 
banks and bankers, the whole circulation may thus be conducted 
with a fifth part only of the gold and silver which would otherwise 
have been requisite. 

Let us suppose, for example, that the whole circulating money 
of some particular country amounted, at a particular time, to one 
million sterling, that sum being then sufficient for circulating the 
whole annual produce of their land and labour. Let us suppose too, 
that some time thereafter, different banks and bankers issued prom- 
issory notes, payable to the bearer, to the extent of one million, re- 
serving in their different coffers two hundred thousand pounds for 
answering occasional demands. There would remain, therefore, in 
circulation, eight hundred thousand pounds in gold and silver, and 
a million of bank notes, or eighteen hundred thousand pounds of 

notes a 
the bes 
sort of 

When a 
lends 01 
in notes 
and kee 
m hand 
in gold 
and silv 
in gold 
and silv 
is sparci 
from th 

and if 
do the 
fifths of 
the gold 
and silvi 
ly circu- 
may be 

and ex- 
for goods, 

supply the 
tion of 
in which 
case the 
profit will 
be an ad- 
dition to 
the net re- 
venue of 
the coun- 

or to sup- 

278 the wealth of nations 

paper and money together. But the annual produce of the land and 
labour of the country had before required only one million to cir- 
culate and distribute it to its proper consumers, and that annual 
produce cannot be immediately augmented by those operations of 
banking. One million, therefore, will be sufficient to circulate it after 
them. The goods to be bought and sold being precisely the same as 
before, the same quantity of money will be sufficient for buj’ing and 
selling them. The channel of circulation, if I may be allowed such 
an expression, will remain precisely the same as before. One million 
we have supposed sufficient to fill that channel. Whatever, there- 
fore, is poured into it beyond this sum, cannot run in it, but must 
overflow. One million eight hundred thousand pounds arc poured 
into it. Eight hundred thousand pounds, therefore, must overflow, 
that sum being over and above what can be employed in the cir- 
culation of the country. But though this sum cannot be employed at 
home, it is too valuable to be allowed to lie idle. It will, therefore, 
be sent abroad, in order to seek that profitable employment uhich 
it cannot find at home. But the paper cannot go abroad ; because at 
a distance from the banks which issue it, and from the country in 
which payment of it can be e.xacted by law, it will not be received 
in common payments. Gold and silver, therefore, to the amount of 
eight hundred thousand pounds will be sent abroad, and the chan- 
nel of home circulation will remain filled with a million of paper, 
instead of the million of those metals which filled it before. 

But though so great a quantity of gold and silver is thus sent 
abroad, we must not imagine that it is sent abroad for nothing, or 
that its proprietors make a present of it to foreign nations. They 
will exchange it for foreign goods of some kind or another, in order 
to supply the consumption either of some other foreign country, or 
of their own. 

If they employ it in purchasing goods in one foreign country in 
order toaupply the consumption of another, or in what is called the 
carrying trade, whatever profit they make will be an addition to the 
neat revenue of their own country. It is like a new fund, created for 
carrying on a new trade; domestic business being now transacted 
by paper, and the gold and silver being converted into a fund for 
this new trade. 

If they employ it in purchasing foreign goods for home consump- 
tion, they may either, first, purchase such goods as are likely to be 
consumed by idle people who produce nothing, such as foreign 
wines, foreign silks, &c.; or, secondly, they may purchase an addi- 
tional stock of materials, tools, and provisions, in order to main- 
tain and employ an additional number of industrious people, v/ho 

MONEY *79 

re-produce, with a profit, the value of their annual consumption. 

So far as it is employed in the first way, it promotes prodigality, , 
increases expence and consumption without increasing production, 
or establishing any permanent fund for supporting that expence, 
and is in every respect hurtful to the society. 

So far as it is employed in the second way, it promotes indus- 
try; and though it increases the consumption of the society, it pro- 
vides a permanent fund for supporting that consumption, the peo- 
ple who consume re-producing, with a profit, the whole value of 
their annual consumption. The gross revenue of the society, the 
annual produce of their land and labour, is increased by the whole 
value which the labour of those workmen adds to the materials 
upon which they are employed; and their neat revenue by what 
remains of this value, after deducting what is necessary for sup- 
porting the tools and instruments of their trade. 

That the greater part of the gold and silver which, being forced 
abroad by those operations of banking, is employed in purchasing 
foreign goods for home consumption, is and must be employed in 
purchasing those of this second kind, seems not only probable but 
almost unavoidable. Though some particular men may sometimes 
increase their expence very considerably though their revenue does 
not increase at all, we may be assured that no class or order of men 
ever does so; because, though the principles of common prudence 
do not always govern the conduct of every individual, they always 
influence that of the majority of every class or order. But the rev- 
enue of idle people, considered as a class or order, cannot, in the 
smallest degree, be increased by those operations of banking. Their 
cxpence in general, therefore, cannot be much increased by them, 
though that of a few individuals among them may, and in reality 
sometimes is. The demand of idle people, therefore, for foreign 
goods, being the same, or verj' nearly the same, as before, a very 
small part of the money, which being forced abroad by tho^e opera- 
tions of banking, is employed in purchasing foreign goods for home 
consumption, is_ likely to be employed in purchasing those for their 
use. The greater part of it will naturally be destined for the employ- 
ment of industry, and not for the maintenance of idleness. 

When we compute the quantity of industry which the circulating 
capital of any society can employ, we must always have regard to 
those parts of it only, which consist in provisions, materials, and 
finished work: the other, which consists in money, and which serves 
only to circulate those three, must always be deducted. In order to 
put industry into motion, three things are requisite; materials to 
work upon, tools to work with, and the wages or recompence for the 

ply bom 
tion (i) 
of lux- 
uries, (j 
of maiei 
als, tools 
and pro- 
with in- 
people ai 
and em- 

If to sup 
ply lux- 
uries, pr( 
and con- 
are in- 
creased ; 

if to sup- 
ply mate 
rials, &c., 
a per- 
fund for 
ing con- 
is pro- 

The greai 

er part ol 

the gold 







tity of in 
which th 
ing capit 
can em- 
ploy is 

mined by 
the provi- 
sions, ma- 
and fin- 
work, and 
not at all 
by the 
of money. 

The sub- 
of paper 
for gold 
and silver 
the mate- 

Louis, and 
nance at 
the ex- 
pence o£ 
the gold 
and silver 


of money 
bears a 
small pro- 
portion to 
the whole 
but a 
larec one 
to that 
part des- 
tined to 


sake of which the v/ork is done. Money is neither a material to work 
. upon, nor a tool to work with; and though the wages of the work- 
man are commonly paid to him in money, his real revenue, like that 
of all other men, consists, not in the money, but in the money’s 
worth; not in the metal pieces, but in what can be got for them. 

The quantity of industry which any capital can employ, must, 
evidently, be equal to the number of workmen whom it can supply 
with materials, tools, and a maintenance suitable to the nature oi 
the work. Money may be requisite for purchasing the materials and 
tools of the work, as well as the maintenance of the workmen. But 
the quantity of industry which the whole capital can employ, is 
certainly not equal both to the money which purchases, and to the 
materials, tools, and maintenance, which are purchased with it; but 
only to one or other of those two values, and to the latter more 
properly than to the former. 

When paper is substituted in the room of gold and silver money, 
the quantity of the materials, tools, and maintenance, which the 
whole circulating capital can supply, may be increased by the whole 
value of gold and silver which used to be employed in purchasing 
them. The whole value of the great wheel of circulation and dis- 
tribution, is added to the goods which are circulated and distrib- 
uted by means of it. The operation, in some measure, resembles that 
of the undertaker of some great work, who, in consequence of some 
improvement in mechanics, takes down his old machinery, and adds 
the difference between its price and that of the new to his circulat- 
ing capital, to the fund from which he furnishes materials and 
wages to his workmen.’’ 

WTiat is the proportion which the circulating money of any coun- 
try bears to the whole value of the annual produce circulated by 
means of it, it is, perhaps, impossible to determine. It has been 
computed by different authors at a fifth, at a tenth, at a twentieth, 
and at a-lliirtieth part of that value.'* But how small soever the pro- 
portion which the circulating money may bear to the whole value of 
the annual produce, as but a part, and frequently but a .=imall part, 
of that produce, is ever destined for the maintenance of industry, it 
must always bear a very considerable proportion to that part. When, 
therefore, by the substitution of paper, the gold and silver neces- 
sary for circulation is reduced to, perhaps, a fifth part of the for- 
mer quantity, if the value of only the greater part of the other four- 

‘ Above, pp. 271, 272. 

"Petty's estimate in Verbum Sapienti is £40,000,000 for tlic income and £6,- 
000.000 for the coin. Gregory King’s estimate is £4,'i,soo,ooo for the income 
and no less than £i:,.!;oo,ooo for the coin, in Geo. Chalmers, Estimate, 1S02, 
PP- 423. 427- 


fifths be added to the funds which are destined for the maintenance 
of industry, it must make a very considerable addition to the quan- 
tity of that industry, and, consequently, to the value of the annual 
produce of land and labour. 

An operation of this kind has, within these five-and-twenty or 
thirty years, been performed in Scotland, by the erection of new 
banking companies in almost every considerable town, and even 
in some country villages.' The effects of it have been precisely those 
above described. The business of the country is almost entirely car- 
ried on by means of the paper of those different banking companies, 
with which purchases and payments of all kinds are commonly 
made. Silver very seldom appears e.vcept in the change of a twenty 
shillings bank note, and gold still seldomer. But though the conduct 
of all those different companies has not been unexceptionable, and 
has accordingly required an act of parliament to regulate it; the 
country notwithstanding, has evidently derived great benefit from 
their trade. I have heard it asserted, that the trade of the city of 
Glasgow, doubled in about fifteen years after the first erection of 
the banks there; and that the trade of Scotland has more than 
quadrupled since the first erection of the two public banks at Edin- 
burgh, of which the one, called The Bank of Scotland, was estab- 
lished by act of parliament in 1695; the other, called The Royal 
Bank, by royal charter in 1727.*’ Whether the trade, either of Scot- 
land in general, or of the city of Glasgow in particular, has really 
increased in so great a proportion, during so short a period, I do not 
pretend to know. If either of them has increased in this proportion, 
it seems to be an effect too great to be accounted for by the sole 
operation of this cause. That the trade and industry of Scotland, 
however, have increased vciy considerably during this period, and 
that the banks have contributed a good deal to this increase, can- 
not be doubted. 

The value of the silver money which circulated in Scotland be- 
fore the union, in 1707, and which, immediately after it, was 
brought into the bank of Scotland in order to be re-coined, amount- 
ed to 411,117/. lor. gd. sterling. Xo account has been got of the 
gold coin : but it appears from the ancient accounts of the mint of 
Scotland, that the value of the gold annually coined somewhat ex- 
ceeded that of the silver.'” There w'ere a good many people too upon 
this occasion, who, from a diffidence of repayment, did not bring 

An open 
tion of 
this kind 
has been 
out in 
with ex- 


There w, 
at the 
Union at 
least a 
sterling ( 
gold and 
and now 
there is 

’Below, p. 292. “'Misprinted “contrary” in ed. 5. 

°Adam Anderson, Commerce, a.d. 1695. 

See Ruddiman’s Preface to .Anderson’s Diplomata, &c. Scotise. Pp. 84, 85. 
See above, p. 213, note. 


Dot half a 

Notes are 
issued by 
ing bills, 

but tbe 
banks in- 
vented the 
system of 
cash ac- 

tlieir silver into the bank of Scotland; and there was, besides, some 
English coin, which was not called in.** The whole value of the gold 
and silver, therefore, which circulated in Scotland before the union, 
cannot be estimated at less than a million sterling. It seems to have 
constituted almost the whole circulation of that country; for though 
the circulation of the bank of Scotland, which had then no rival, was 
considerable, it seems to have made but a very small part of the 
whole. In the present times the whole circulation of Scotland can- 
not be estimated at less than two millions, of which that part which 
consists in gold and silver, most probably, does not amount to half 
a million. But though the circulating gold and silver of Scotland 
have suffered so great a diminution during this period, its real rich- 
es and prosperity do not appear to have suffered any. Its agricul- 
ture, manufactures, and trade, on the contrary, the annual produce 
of its land and labour, have evidently been augmented. 

It is chiefly by discounting bills of exchange, that is, by ad- 
vancing money upon them before they are due, that the greater part 
of banks and bankers issue their promissory notes. They deduct 
always, upon whatever sum they advance, the legal interest till the 
bill shall become due. The pajunent of the bill, when it becomes 
due, replaces to the bank the value of what had been advanced, to- 
gether with a clear profit of the interest. The banker who advances 
to the merchant whose bill he discounts, not gold and silver, but his 
own promissory notes, has the advantage of being able to discount 
to a greater amount by the whole value of his promissory notes, 
which he finds by experience, are commonly in circulation. He is 
thereby enabled to make his clear gain of interest on so much a 
larger sum. 

The commerce of Scotland, which at present is not very great, 
was still more inconsiderable when the two first banking companies 
were established; and those companies would have had but little 
trade, had they confined their business to the discounting of bills of 
exchange. They invented, therefore, another method of issuing their 
promissory notes; by granting, what they called, cash accounts, 
that is by giving credit to the extent of a certain sum (two or three 
thousand pounds, for example), to any individual who could pro- 
cure two persons of undoubted credit and good landed estate to 
become surety for him, that whatever money should be advanced 
to him, within the sum for which the credit had been given, .should 

““The folly of a few misers or the fear that people might have of losing 
their money, or various other dangers and accidents, prevented ver) many of 
the old Scots coins from being brought in,” op. cit., p. 17s. Ruddiman in a 
note, op. nt., p. 231, says: “The English coin was also ordained to be called 
in," but docs not include it in hb estimate of not less than £900^300, p. 176. 



be repaid upon demand, together wth the legal interest. Credits of 
this kind are, I believe, commonly granted by banks and bankers 
in all different parts of the world. But the easy terms upon which 
the Scotch banking companies accept of re-payment are, so far as I 
know, peculiar to them, and have, perhaps, been the principal 
cause, both of the great trade of those companies, and of the bene- 
fit which the country has received from it. 

WTioever has a credit of this kind with one of those companies, 
and borrows a thousand pounds upon it, for example, may repay 
this sum piece-meal, by twenty and thirty pounds at a time, the 
company discounting a proportionable part of the interest of the 
great sum from the day on which each of those small sums is paid 
in, till the whole be in this manner repaid. All merchants, therefore, 
and almost all men of business, find it convenient to keep such 
cash accounts with them, and are thereby interested to promote the 
trade of those companies, by readily receiving their notes in all 
payments, and by encouraging all those with whom they have any 
influence to do the same. The banks, when their customers apply 
to them for money, generally advance it to them in their own 
promissory notes. These the merchants pay away to the manufac- 
turers for goods, the manufacturers to the farmers for materials and 
provisions, the farmers to their landlords for rent, the landlords 
repay them to the merchants for the conveniencies and luxuries 
with w'hich they supply them, and the merchants again return them 
to the banks in order to balance their cash accounts, or to replace 
what they may have borrowed of them; and thus almost the whole 
money business of the country is transacted by means of them. 
Hence the great trade of those companies. 

By means of those cash accounts every merchant can, without 
imprudence, carry on a greater trade than he otherwise could do. 
If there are two merchants, one in London, and the other in Edin- 
burgh, who employ equal stocks in the same branch of tfade, the 
Edinburgh merchant can, without imprudence, carry on a greater 
trade, and give employment to a greater number of people than the 
London merchant. The London merchant must always keep by him 
a considerable sum of money, either in his own coffers, or in those 
of his banker, who gives him no interest for it, in order to answer 
the demands continually coming upon him for payment of the goods 
which he purchases upon credit. Let the ordinary amount of this 
sum be supposed five hundred pounds. The value of the goods in 
his warehouse must always be less by five hundred pounds than it 
would have been, had he not been obliged to keep such a sum unem- 
ployed. Let us suppose that he generally disposes of his whole stock 

which er 
able the: 
to issue 

and mak 
it possibi 
for everj 
to carry 
on a 
trade tha 
he other- 

can of 
bills when 

The whole 

of the 



can never 


the gold 

and silver 



have been 





upon hand, or of goods to the value of his whole stock upon hand, 
, once in the year. By being obliged to keep so great a sum unem- 
ployed, he must sell in a year five hundred pounds worth less goods 
than he might othenvise have done. His annual profits must be less 
by all that he could have made by the sale of five hundred pounds 
worth more goods; and the number of people employed in preii’.i'- 
ing his goods for the market, must be less by all those that 1 ve 
hundred pounds more stock could have employed. The merchant m 
Edinburgh, on the other hand, keeps no money unemployed fur 
answering such occasional demands. When they actually come upon 
him, he'sutisfies them from his cash accoimt with the bank, an.d 
gradually replaces the sum borrowed willi the niimcy or paper 
which comes in from the occasional sale.s of his good.;. With the 
same stock, therefore, he can, without imprudence, have at all times 
in his warehouse a larger quantity of goods than the London mer- 
chant; and can thereby both make a greater profit him^c!f. and 
give constant employment to a greater number of industrious peo- 
ple who prepare those goods for the market. Hence the great benefit 
which the country has derived from this trade. 

The facility of discounting bills of exchange, it may be thought 
indeed, gives the English merchants a conveniency equivalent to 
the cash accounts of the Scotch merchants. But the Scotch mer- 
chants, it must be remembered, can discount their bills of exchange 
as easily as the English merchants; and have, besides, the addi- 
tional conveniency of their cash accounts. 

The whole paper money of every kind which can easily circulate 
in any country never can exceed the value of the gold and silver, of 
which it supplies the place, or which (the commerce being sup- 
posed the same) would circulate there, if there was no paper money. 
■ If twenty shilling notes, for example, are the lowest paper money 
current in Scotland, the whole of that currency which can easily 
circulate* there cannot exceed the sum of gold and silver which 
would be necessary for transacting the annual exchanges of twenty 
shillings value and upwards usually transacted within that coun- 
try. Should the circulating paper at any time exceed that sum, as 
the excess could neither be sent abroad nor be employed in the cir- 
culation of the country, it must immediately return upon the banks 
to be exchanged for gold and silver. Many people would immediate- 
ly perceive that they had more of this paper than was necessary 
for transacting their business at home, and as they could not send it 
abroad, they would immediately demand payment of it from the 
banks. When this superfluous paper was converted into gold and 
silver, they could easily find a use for it by sending it abroad; but 



they could find none while it remained in the shape of paper. There 
would immediately, therefore, be a run upon the banks to the 
whole extent of this superfluous paper, and, if they shewed any 
difficulty or backwardness in payment, to a much greater extent; 
the alarm, which this would occasion, necessarily increasing the run. 

Over and above the e.xpences which are common to every branch 
of trade; such as the expence of house-rent, the wages of servants, 
clerks, accountants, &c.: the expences peculiar to a bank consist 
chiefly in two articles: First, in the expence of keeping at all times 
in its coffers, for answering the occasional demands of the holders 
of its notes, a large sum of money, of which it loses the interest: 
And, secondly, in the expcnce of replenishing those coffers as fast 
as they are emptied by answering such occasional demands. 

.A banking company, which issues more paper than can be em- 
ployed in the circulation of the country, and of which the excess is 
continually returning upon them for payment, ought to increase 
the quantity of gold and silver, which they keep at all times in 
their coffers, not only in proportion to this excessive increase of 
their circulation, but in a much greater proportion: their notes re- 
turning upon them much faster than in proportion to the excess of 
their quantity. Such a company, therefore, ought to increase tlie 
first article of their expcnce, not only in proportion to this forced 
increase of their business, but in a much greater proportion. 

The coffers of such a company too, though they ought to be 
filled much fuller, yet must empty themselves much faster than if 
their business was confined within more reasonable bounds, and 
must require, not only a more violent, but a more constant and un- 
interrupted exertion of expence in order to replenish them. The coin 
too, which is thus continually drawn in such large quantities from 
their coffers, cannot be employed in the circulation of the country. 
It comes in place of a paper which is over and above what can be 
employed in that circulation, and is therefore over and abive what 
can be employed in it loo. But as that coin will not be allowed to 
lie idle, it must, in one shape or another, be sent abroad, in order to 
find that jirofitable employment which it cannot find at home; and 
this continual exportation of gold and silver, by enhancing the dif- 
ficulty, musi necessarily enhance still further the cxpence of the 
bank, in finding new gold and silver in order to replenish those 
coffers, which empty themselves so very rapidly. Such a company, 
therefore, must, in proportion to this forced increase of their busi- 
ness, increase the second article of their expence still more than the 

Let us suppose that all the paper of a particular bank, which the 

The pecu- 
liar E.X- 
pensei of 
a bank an 
(i) the 
and ( 2 ) 
the re- 
of a stock 
of money 
whicli to 

A bank 
issues too 
much pa- 
per will 
much in- 
both the 

and the 
second ex 

as may be 
shown by 
an ex- 



not un- 

Bank of 

and the 


circulation of the country can easily absorb and employ, amounts 
exactly to forty thousand pounds; and that for answering occa- 
sional demands, this bank is obliged to keep at all times in its cof- 
fers ten thousand pounds in gold and silver. Should this bank at- 
tempt to circulate forty-four thousand pounds, the four thousand 
pounds which are over and above what the circulation can easily 
absorb and employ, will return upon it almost as fast as they are 
issued. For answering occasional demands, therefore, this bank 
ought to keep at all times in its coffers, not ten thousand pounds 
only, but fourteen thousand pounds. It will thus gain nothing by the 
interest of the four thousand pounds excessive circulation; and it 
will lose the whole expence of continually collecting four thousand 
pounds in gold and silver, which will be continually going out of its 
coffers as fast as they are brought into them. 

Had every particular banking company always understood and 
attended to its own particular interest, the circulation never could 
have been overstocked with paper money. But every particular 
banking company has not always understood or attended to its own 
particular interest, and the circulation has frequently been over- 
stocked with paper money. 

By issuing too great a quantity of paper, of which the excess was 
continually returning, in order to be exchanged for gold and silver, 
the bank of England was for many years together obliged to coin 
gold to the extent of between eight hundred thousand pounds and a 
million a year; or at an average, about eight hundred and fifty 
thousand pounds.^" For this great coinage the bank (in conse- 
quence of the worn and degraded slate into which the gold coin had 
fallen a few years ago) was frequently obliged to purchase gold bul- 
lion at the high price of four pounds an ounce, which it soon after 
issued in coin at 3/. 17J. lo-j d. an ounce, losing in this manner be- 
tween two and a half and three per cent, upon the coinage of so very 
large a swm. Though the bank therefore paid no seignorage, though 
the government was properly at the expence of the coinage, this 
liberality of government did not prevent altogether the cxpencc of 
the bank. 

The Scotch banks, in consequence of an c.xcess of the same kind, 
were all obliged to employ constantly agents at London to collect 
money for them, at an expence which was seldom below one and a 

“From 1766 to 1772 inclusive the coinage averaged about f8io,ooo per an- 
num. The amount for “ten years together" is staled below, pp. 516, 521, 
to have been upwards of £800,000 a year, though the average for the ten 
years 1763-1772 was only £760,000. But the inclusion of the large coinage of 
1773, uiz., £1,317,643, would raise these averages considerably. Sec the figures 
at the end of each year in Maepherson, Annals of Commerce. 



half or two per cent. This money was sent down by the waggon, and 
insured by the carriers at an additional expence of three quarters 
per cent, or fifteen shillings on the hundred pounds. Those agents 
were not always able to replenish the coffers of their employers so 
fast as they were emptied. In this case the re.source of the banks 
was, to draw upon their correspondents in London bills of exchange 
to the extent of the sum which they wanted. When those corres- 
pondents afterwards drev/ upon them for the payment of this sum, 
together with the interest and a commission, some of those banks, 
from the distress into which their excessive circulation had thrown 
them, had sometimes no other means of satisfying this draught but 
by drawing a second set of bills either upon the same, or upon some 
other correspondents in London; and the same sum, or rather bills 
for the same sum, would in this manner make sometimes more than 
two or three journies; the debtor bank, paying always the interest 
and commission upon the whole accumulated sum. Even those 
Scotch banks which never distinguished themselves by their e.x- 
treme imprudence, were sometimes obliged to employ this niinous 

The gold coin which was paid out either by the bank of England, 
or by the Scotch banks, in exchange for that part of their paper 
which was over and above what could be employed in the circula- 
tion of the country, being likewise over and above what could be 
employed in that circulation, was sometimes sent abroad in the 
shape of coin, sometimes melted down and sent abroad in the shape 
of bullion, and sometimes melted down and sold to the bank of 
England at the high price of four pounds an ounce. It was the new- 
est, the heaviest, and the best pieces only which were carefully 
picked out of the whole coin, and either sent abroad or melted 
down. At home, and while they remained in the shape of coin, 
those heavy pieces were of no more value than the light: But they 
were of more value abroad, or when melted down into bifilion, at 
home. The bank of England, notwithstanding their great annual 
coinage, found to their astonishment, that there was every year the 
same scauity of coin as there had been the year before; and that 
notwithstanding the great quantity of good and new coin which was 
every year issued from the bank, the state of the coin, instead of 
growing better and better, became every year worse and worse. 
Every 3'ear they found themselves under the necessity of coining 
nearly the same quantity of gold as they had coined the year be- 
fore, and from the continual rise in the price of gold bullion, in con- 
sequence of the continual wearing and dipping of the coin, the ex- 

” Misprinted “remain” in cd. S. 

The exces- 
sive circu- 
lation was 
caused by 

A bank 
ought not 
to ad- 
more than 

have to 
keep by 
them in 

This limit 
is ob- 
when only 
real bills 
of ex- 
are dis- 

Cash ac- 
' hould be 

288 jHE wealth of nations 

pence of this great annual coinage became every year greater and 
greater. The bank of England, it is to be observed, by supplying its 
own coffers with coin, is indirectly obliged to supply the whole king- 
dom, into which coin is continually flowing from those coffers in a 
great variety of ways. Whatever coin therefore was wanted to sup- 
port this excessive circulation both of Scotch and English paper 
money, whatever vacuities this excessive circulation occasioned in 
the necessary coin of the kingdom, the bank of England was 
obliged to supply them. The Scotch banks, no doubt, paid all of 
them very dearly for their own imprudence and inattention. Rut the 
bank of England paid very dearly, ni’t only for its o'vn imprud- 
ence, but for the much greater imprudence of almost all the Scotch 

The over-trading of some bold projectors in both parts of the 
united kingdom, was the original cause of this excessive circulation 
of paper money. 

What a bank can with propriety advance to a merchant or un- 
dertaker of any kind, is not either the whole capital with which he 
trades, or even any considerable part of that capital ; but that part 
of it only, which he would othenvise be obliged to keep by him un- 
employed, and in ready money for answering occasional (Irmand.s. 
If the paper money which the bank advances never exceeds this 
value, it can never exceed the value of the gold and silver, which 
would necessarily circulate in the country if there was no paper 
money; it can never exceed the quantity wliich the circulation of 
the country can easily absorb and employ. 

When a bank discounts to a merchant a real bill of exchange 
drawn by a real creditor upon a real debtor, and ^^■hich, as soon as it 
becomes due, is really paid by that debtor; it only advances to him 
a part of the value which he would otherwise be obliged to keep by 
him unemployed and in ready money for answering occasional de- 
mands. The payment of the bill, when it becomes due, replaces to 
the bank the value of what it had advanced, together with the in- 
terest. The coffers of the bank, so far as its dealing: are confined to 
such customers, resemble a water pond, from which, though a 
stream is continually running out, yet another is continually run- 
ning in, fully equal to that which runs out; so that, without any 
further care or attention, the pond keeps always equally, or very 
near equally full. Little or no expence can ever be necessary for re- 
plenishing the coffers of such a bank. 

A merchant, without over-trading, may frequently have occa- 
sion for a sum of ready money, even when he has no bills to dis- 
count. When a bank, besides discounting his bills, advances him 



likewise upon such occasions, such sums upon his cash account, and 
accepts of a piece meal repayment as the money comes in from the 
occasional sie of his goods, upon the easy terms of the banking 
companies of Scotland; it dispenses him entirely from the necessity 
of keeping any [tart of his sttKk by him unemployed and in ready 
money for ansnering occasional demands. When such demands 
actually come upon him, he c.aii answer them sufficiently from his 
cash account. 'I'lie bank, however, in dealing with .such customers, 
ought to obseive with great attention, whether in the course of 
some shoit period (of four, five, .six, or eight months, for example) 
Ibe sum of the repa3mients which it commonly receives from them, 
is. or is not, fully equal to that of the advances which it commonly 
makes to them. If, within the of such short periods, the sura 
of the repajTiients from certain customers is, upon most occasions, 
fully equal to that of the advances, it may safely continue to deal 
with such customers. Though the stream which is in this case con- 
tinually running out from its coffers may be very large, that which 
is continually running into them must be at least equally large; so 
that without any further tare or attention those coffers are likely to 
be always eciually or very near equally full; and scarce ever to re- 
quire any extraordinary expence to replenish them. If, on the con- 
trary, the sum of the repayments from certain other customers falls 
commonly vciy much short of the advances which it makes to them, 
it cannot with any safety continue to deal with such customers, at 
least if they continue to deal with it in this manner. The stream 
which is in this case continually ninning out from its coffers is 
necessarily much larger than that which is continually running in; 
so that, unless they are replenished by some great and continual 
effort of exigence, tho.'-e coffers must soon be e.xhausted altogether. 

The banking companies of Scotland, accordingly, were for a long 
time very careful to require frecjuent and regular repayments from 
all their cuslomci.-,, and did not care to deal with any irer.srn, what- 
ever might be his fortune or credit, who did not make, what tlrcy 
called, freijuent and regular oireralions with them. By this atten- 
tion, besides saving almost entirely the extraordinary expcnce of re- 
plenishing their coffers, they gained two other very considerable 

First, by this attention they were enabled to make some toler- 
able judgment concerning the thriving or declining circumstances 
of their debtors, without being obliged to look out for any other 
evidence besides what their own books afforded them; men being 
for the most part either regular or irregular in their repayments, 
according as their circumstances are either thriving or declining. A 

to secure 
the same 

as tlicy 
VC ere for 
time by 
tl.c Scotch 
which re- 
and regu- 
lar opera- 

and thus 
(i) were 

btancu of 

and (2) 
were se- 
too much 


private man who lends out his money to perhaps half a dozen or a 
dozen of debtors, may, either by himself or his agents, observe and 
enquire both constantly and carefully into the conduct and situa- 
tion of each of them. But a banking company, which lends money 
to perhaps five hundred different people, and of which the atten- 
tion is continually occupied by objects of a very different kind, can 
have no regular Information concerning the conduct and circum- 
stances of the greater part of its debtors beyond what its own books 
afford it.** In requiring frequent and regular repayments from all 
their customers, the banking companies of Scotland had probably 
this advantage in view. 

Secondly, by this attention they secured themselves from the ■ 
possibility of issuing more paper money than what the circulation 
of the country could easily absorb and employ. When they ob- 
served, that within moderate periods of time the repayments of a 
particular customer were upon most occasions fully equal to the 
advances which they had made to him, they might be assured that 
the paper money which they had advanced to him, had not at any 
time exceeded the quantity of gold and silver which he would other- 
wise have been obliged to keep by him for answering occasional de- 
mands; and that, consequently, the paper money, which they hai 
circulated by his means, had not at any time exceeded the quantit} 
of gold and silver which would have circulated in the country, had 
there been no paper money. The frequency, regularity and amounts 
of his rcpajTiients would sufficiently demonstrate that the amount 
of their advances had at no time exceeded that part of his capital 
which he would otherwise have been obliged to keep by him unem- 
ployed and in ready money for answering occasional demands; that 
is, for the purpose of keeping the rest of his capital in constant rm 
ployment. It is this part of his capital only which, within model ate 
periods of time, is continually returning to every dealer in the siiape 
of money, whether paper or coin, and continually going from him 
in the same shape. If the advances of the bank had commonly ex- 
ceeded this part of his capital, the ordinary amount of his repay- 
ments could not. within moderate periods of time, have equalled the 
ordinary amount of its advances. The stream which, by means of 
his dealings, was continually running into the coffers of the bank, 
could not have been equal to the stream which, by means of the 
same dealings, was continually running out. The ^vanccs of the 
bank paper, by exceeding the quantity of gold and silver which, had 

**But as Playfair (cd. of We(^tk 0/ NationSf vol. i., p. 472) points out, the 
more customers a bank has the more it is likely to know the transactions of 
each of them. 



there been no such advances, he would have been obliged to keep 
by him for answering occasional demands, might soon come to ex- 
ceed the whole quantity of gold and silver which (the commerce 
being supposed the same) would have circulated in the country had 
there been no paper money : and consequently to exceed the quan- 
tity which the circulation of the country could easily absorb and 
employ; and the excess of this paper money would immediately 
have returned upon the bank in order to be exchanged for gold and 
silver. This second advantage, though equally real, was not per- 
haps so well understood by all the different banking companies of 
Scotland as the first. 

When, partly by the conveniency of discounting bills, and partly 
by that of cash accounts, the creditable traders of any country can 
be di^penscd from the necessity of keeping any part of their stock 
by them unemployed and in ready money for answering occasional 
demands, they can reasonably expect no farther assistance from 
banks and bankers, who, when they have gone thus far, cannot, 
consistently ttiih their own interest and safety, go farther. A bank 
cannot, consistently with its own interest, advance to a trader the 
whole or even the greater part of the circulating capital with which 
he trades; because, though that capital is continually returning to 
him in the shape of money, and going from him in the same shape, 
yet the whole of the reti rns is loo distant from the whole of the out- 
goings, and the sum of his repayments could not equal the sum of 
its advances within such moderate periods of time as suit the con- 
veniency of a bank. Still less could a bank afford to advance him 
any considerable part of his fi.xed capital; of the capital which the 
undertaker of an iron forge, for example, employs in erecting his 
forge and smelling-house, his work-houses and warehouses, the 
dwelling-houses of his workmen, &c.; of the capital which the un- 
dertaker of a mine employs in sinking his shafts, in erecting en- 
gines for drawing out the water, in making roads and waggOn-irvays, 
&c.; of the capital which the person who undertakes to improve 
land emplo3’s in,clcaring. draining, enclosing, manuring and plough- 
ing waste and uncultivated fields, in building farm-houses, with all 
their necessary appendages of stables, granaries, &c. The returns of 
the fixed capital are in almost all cases much slower than those of 
the circulating capital; and such expences, even when laid out with 
the greatest prudence and judgment, very seldom return to the un- 
dertaker till after a period of many 3fears, a period by far too dis- 
tant to suit the conveniency of a bank. Traders and other under- 
takers may, no doubt, with great propriety, carry on a very consid- 
erable part of their projects with borrowed money. In justice to 

ought to 
be only 
for mode- 
rate peri- 
ods of 

five > cars 
ago the 
amount of 
had been 
in Scot- 

but the 
were not 


their creditors, however, their own capital ought, in this case, to be 
sufficient to ensure, if I may say so, the capital of those creditors; 
or to render it extremely improbable that those creditors should in- 
cur any loss, even though the success of the project should fall very 
much short of the expectation of the projectors. Even with this pre- 
caution too, the money which is borrowed, and which it is meant 
should not be repaid till after a period of several years, ought not 
to be borrowed of a bank, but ought to be borrowed upon bond or 
mortgage, of such private people as propose to live upon the inter- 
est of their money, without taking the trouble themselves to em- 
ploy the capital ; and who are upon that account willing to lend that 
capital to such people of good credit as are likely to keep it for sev- 
eral years. A bank, indeed, which lends its money without the ex- 
pence of stampt paper, or of attornies fees for drawing bonds and 
mortgages, and which accepts of repayment upon the easy terms of 
the banking companies of Scotland; would, no doubt, be a very 
convenient creditor to such traders and undertakers. But such trad- 
ers and undertakers would, surely, be most inconvenient debtors to 
such a bank. 

It is now more than five-and-twenty years since the paper money 
issued by the different banking companies of Scotland was fully 
equal, or rather was somewhat more than fully equal, to what the 
circulation of the country' could easily absorb and employ.''' Those 
companies, therefore, had so long ago given all the assistance to the 
traders and other undertakers of Scotland which it is possible for 
banks and bankers, consistently with their own interest, to give. 
They had even done somewhat more. They had over-traded a little, 
and had brought upon themselves that, or at least that diminu- 
tion of profit, which in this particular business never fails to attend 
the smallest degree of over-trading. Those traders and other under- 
takers, having got so much assistance from banks and bankers, 
wished to get still more. The banks, they seem to have thought, 
could extend their credits to whatever sum might be wanted, with- 
out incurring any other expence besides that of a few reams of 
paper. They complained of the contracted views and dastardly 
spirit of the directors of those banks, which did not, they said, ex 
tend their credits in proportion to the extension of the trade of the 
country; meaning, no doubt, by the extension of that trade the ex- 
tension of their own projects beyond what they could carry on, 
either with their own capital, or with what they had credit to bor- 
row of private people in the usual way of bond or mortgage. The 
banks, they seem to have thought, were in honour bound to supp’y 

“Above, p. 181. 



Ihe deficiency, and to provide them with all the capital which they 
wanted to trade with. The banks, however, were of a different opin- 
ion, and upon their refusing to extend their credits, some of those 
traders had recourse to an expedient which, for a time, served their 
purpose, though at a much greater espence, yet as effectually as the 
utmost e.xtension of bank credits could have done. This expedient 
was no other than the well-known shift of drawing and re-drawing; 
the shift to which unfortunate traders have sometimes recourse 
when they are upon the brink of bankruptcy. The practice of rais- 
ing money in this manner had been long known in England, and 
during the course of the late war. when the high profits of trade 
afforded a great temptation to over-trading, is said to have been 
carried on to a very great extent. From England it was brought into 
Scotland, where, in proportion to tlie very limited commerce, and 
to the very moderate capital of the country, it was soon carried on 
to a much greater extent than it ever had been in England. 

The practice of drawing and re-drawing is so well known to all 
men of business, that it may perhaps be thought unnecessary to 
give any account of it. But as this bock may come into the hands of 
many people who are not men of business, and as the effects of this 
practice upon the banking trade are not perhaps generally under- 
stood even by men of business themselves, I shall endeavour to ex- 
plain it as distinctly as I can. 

The customs of merchants, which were established when the bar- 
barous laws of Europe did not enforce the performance of their con- 
tracts, and which during the course of the two last centuries have 
been adopted into the laws of all European nations, have given such 
extraordinary privileges to bills of exchange, that money is more 
readily advanced upon them, than upon any other sjjecies of obli- 
gation : especially when they are made payable within so short a 
period as two or three months after their date. If, when the bill be- 
comes due, the acceptor does not pay it as soon as it is presented, he 
becomes from that moment a bankrupt. The bill is protested, and 
returns upon the drawer, who, if he does not immediately pay it, 
becomes likewise a bankrupt. If, before it came to the person who 
presents it to the acceptor for payment, it had passed through the 
hands of several other persons, who had successively advanced to 
one another the contents of it either in money or goods, and who to 
express that each of them had in his turn received those contents, 
had all of them in their order endorsed, that is, written their names 
upon the back of the bill; each endorser becomes in his turn liable 
to the owner of the bill for those contents, and, if he fails to pay, he 
becomes too from that moment a bankrupt. Though the drawer, 

and some 
of them 
to draw- 
ing and 

shall be 

Bills of 
have ex- 
nary legal 

So two 
one in 
and one 
in Edin- 
draw bills 
on each 




raised in 
this ex- 


acceptor, and endorsers of the bill should, all of them, be persons of 
^ doubtful credit; yet still the shortness of the date gives some secur- 
* ity to the owner of the bill. Though all of them may be very likely 
to become bankrupts; it is a chance if they all become so in so short 
a time. The house is crazy, says a weary traveller to himself, and 
will not stand very long; but it is a chance if it falls to-night, and I 
will venture, therefore, to sleep in it to-night. 

The trader A in Edinburgh, we shall suppose, draws a bill upon 
B in London, payable two months after date. In reality B in Lon- 
don owes nothing to A in Edinburgh; but he agrees to accept of 
.\’s bill, upon condition that before the term of payment he shall 
redraw upon A in Edinburgh for the same sura, together with the 
interest and a commission, another bill payable likewise two months 
after date. B accordingly, before the expiration of the first two 
months, re-draws this bill upon A in Edinburgh; who again, before 
the expiration of the second two months, draws a second bill upon 
B in London, payable likewise two months after date; and before 
the expiration of the third two months, B in London re-draws upon 
A in Edinburgh another bill, payable also two months after date. 
This practice has sometimes gone on, not only for several months, 
but for several years together, the bill always returning upon A in 
Edinburgh, with the accumulated interest and commission of all 
the former bills. The interest was five per cent, in the year, and the 
commission was never less than one half per cent, on each draught. 
This commission being repeated more than six times in the year, 
whatever money A might raise by this expedient must necessarily 
have cost him something more than eight per cent, in the year, and 
sometimes a great deal m.ore; when either the price of the commis- 
sion happened to rise, or when he was obliged to pay compound in- 
terest upon the interest and commission of former bills. This prac- 
tice was called raising money by circulation. 

In a epuntry where the ordinary profits of stock in the greater 
part of mercantile projects are supposed to run between six and ten 
per cent., it must have been a very fortunate speculation of which 
the returns could not only repay the enormous expence at which the 
money was thus borrowed for carrying it on; but afford, besides, a 
good surplus profit to the projector. Many vast and extensive pro- 
jects, however, were undertaken, and for several years carried on 
without any other fund to support them besides what was raised at 
this enormous expence. The projectors, no doubt, had in their gold- 
en dreams the most distinct vision of this great profit. Upon their 
awaking, however, either at the end of their projects, or when they 

MONEY *95 

were no longer able to carry them on, they very seldom, I believe, 
had the good fortune to find it.^® , 

The bills which A in Edinburgh drew upon B in London, he reg- 
ularly discounted two months before they were due with some bank 
or banker in Edinburgh; and the bills which B in London redrew 
upon A in Edinburgh, he as regularly discounted either with the 
bank of England, or with some other bankers in London. Whatever 
was advanced upon such circulating bills, was, in Edinburgh, ad- 
vanced in the paper of the Scotch banks, and in London, when they 
were discounted at the bank of England, in the paper of that bank. 
Though the bills upon which this paper had been advanced, were all 
of them re-paid in their turn as soon as they became due ; yet the 
value which had been really advanced upon the first bill, was never 
really returned to the banks which advanced it; because, before 
each bill became due, another bill was always drawn to somewhat a 

”The method described in the text was by no means cither the most com- 
mon or the most expensive one in which those adventurers sometimes raised 
money by circulation. It frequently happened that A in Edbburgh would eu- 
able B in London to pay the first bill of exchange by drawing, a few days 
before it became due, a second bill at three months date upon the same B in 
London. This bill, being payable to his own order, A sold in Edinburgh at 
par; and with its contents purchased bills upon London payable at sight to 
the order of B, to whom he sent them by the post. Towards the end of the 
late war, the exchange between Edinburgh and London was frequently three 
per cent, against Edinburgh, and those bills at sight must frequently have cost 
A that premium. This transaction therefore bring repeated at least four times 
in the > car, and being loaded with a commission of at least one half per cent, 
upon each repetition, must at that period have cost A at least fourteen per 
cent, in the year. .\t other times A would enable B to discharge the first bill 
of exchange by drawing, a few days before it became due, a second bill at two 
months date; not upon B, but upon some third person, C, for example, in 
London. This other bill was made payable to the order of B, who, upon its 
being accepted by C, discounted it with some banker in London; and A en- 
abled C to discharge it by drawing, a few days before it became due, a third 
bill, likewise at two months date, sometimes upon his first correspondent B, 
and sometimes upon some fourth or fifth person. D or E, for example. This 
third bill was made payable to the order of C; who. as soon astit was ac- 
cepted, discounted it in the same manner with some banker in London. Such 
operations being repeated at least six times in the year, and being loaded with 
a commission of gt least one-half per cent, upon each repetition, together with 
the legal interest of five per cent., this method of raising money, in the same 
manner as that described in the text, must have cost A something more than 
eight per cent. By saving, however, the exchange between Edinburgh and 
London it was less expensive than that mentioned in the foregoing part of 
this note; but then it required an establi^ed credit with more houses than one 
in London, an advantage which many of these adventurers could not always 
find it easy to procure. This note appears first in ed. 2. Playfair observes that 
the calculation of the loss of 14 per cent, by the first method is wrong, since 
“if A at Edinburgh negotiated his bills on London at 3 per cent. loss, he would 
gain as much in purchasing bills on London with the money.” — Ed. of Wealth 
of Nations, vol. i., p. 483, note. 

The bill 
on Lon- 

would be 
ed in 
and the 
ed in 

and each 

ways re- 
placed by 

thus ad- 
vanced by 
the hanks 
was in ex- 
cess of the 
limit laid 
but this 
wai not 
at hrst. 

When the 
round it 
out they 
made dif- 
about dis- 

296 the wealth of nations 

greater amount than the bill which was soon to be paid ; and the ais- 
, counting of this other bill was essentially necessary totvards the 
'payment of that which was soon to be due. Tins payment, there- 
fore, was altogether fictitious. The stream, which, by means of those 
circulating bills of exchange, had once been made to run out from 
the coffers of the banks, was never replaced by any stream which 
really run into them. 

The paper which was issued upon those circulating bills of ex- 
change, amounted, upon many occasions, to the whole fund des- 
tined for carrying on some vast and extensive project of agriculture, 
commerce, or manufactures: and not merely to that part of it which, 
had there been no paper money, the projector would have been 
obliged to keep by him, unemployed and in ready money for an- 
swering occasional demands. The greater part of this paper was, 
consequently, over and above the value of the gold and silver which 
would have circulated in the country, had there been no paper 
money. It was over and above, therefore, what the circulation of 
the country could easily absorb and employ, and upon that account 
immediately returned upon the banks in order to be exchanged for 
gold and silver, which they were to find as they could. It was a cap- 
ital which those projectors had very artfully contrived to draw from 
those banks, not only without their knowledge or deliberate con- 
sent, but for some time, perhaps, without their having the most dis- 
tant suspicion that they had really advanced it. 

When two people, who are continually drawing and re-drawing 
upon one another, discount their bills always with the same banker, 
he must immediately discover what they are about, and see clearly 
that they are trading, not with any capital of their own, but with 
the capital which he advances to them. But this discovery i.s nvi 
altogether so easy when they discount their bills sometimes wliii 
one banker, and sometimes with another, and when the ti\o 
persons do not constantly draw and re-draw upon one another, but 
occasionally run the round of a great circle of projector.s, who find 
it for their interest to assist one another in this metliod of rai-sing 
money, and to render it, upon that account, os di.Ticull as possible 
to distinguish between a real and a fictitious bill of exchange; be- 
tween a bill drawn by a real creditor upon a real debtor, and a bill 
for which there was properly no real creditor but the bank which 
discounted it; nor any real debtor but the projector who made use 
of the money. When a banker had even made this discovery, he 
might sometimes make it too late, and might find that he had al- 
ready discounted the bills of those projectors to so great an extent, 
that, by refusing to discount any more, he would necessarily make 

MONEY 297 

them all bankrupts, and thus, by ruining them, might perhaps ruin 
himself. For his ov/n interest and .safety, therefore, he might find iti 
necessary, in this very perilous situation, to go on for some time, 
endeavouring, however, to withdraw gradually, and upon that ac- 
count making every day greater and greater difficulties about dis- 
counting, in order to force those projectors by degrees to have re- 
course, either to other bankers, or to other methods of raising 
money: so as that he him.self might, as soon as possible, get out of 
the circle. The difficulties, accordingly, which the bank of England, 
which the principal bankers in London, and which even the more 
prudent Scotch banks began, after a certain time, and when all of 
them had alreticly gone too far, to make about discounting, not only 
alarmed, but enraged in the highest degree those projectors. Their 
own distress, of which this prudent and necessary reserve of the 
banks was, no doubt, the immediate occasion, they called the dis- 
tress of the country; and this distress of the country, they said, was 
altogether owing to the ignorance, pusillanimity, and bad conduct 
of the banks, which did not give a sufficiently liberal aid to the 
spiritual undertakings of those who exerted themselves in order to 
beautify, improve, and enrich the country. It was the duty of the 
banks, they seemed to think, to lend for as long a time, and to as 
great an extent as they might wish to borrow. The banks, however, 
by refusing in this manner to give more credit to those, to whom 
they had already .given a great deal too much, took the only method 
by which it was now possible to save either their own credit, or the 
public credit of the country. 

In the midst of this clamour and distress, a new bank was 
established in Scotland for the express purpose of relieving the dis- 

^'Thc index s.v. B:mk Rives the name, "the Ayr bank.’" Its head office was 
at Ayr, but it had branches at Edinburgh and Dumlrics. A detailed history of 
it is to be found in T/if Frreipitalhn mid Fall of Meurs. Douslas, Heron and 
Company, late Banters in Air with the Causes of their Distress ithd Ruin in- 
vcstisateii and considered by a Committee of Inquiry appointed by the Pro- 
prietors, Edinburgli, 1778. From thi.s it appears that Smith's account of the 
proceedings of tile bank i.s extremely accurate, a fact which is douDtIcss due to 
his old pupil, the Duke of Bucclcuch, having been one of the principal share- 
holders. Writing to Pultency on 5th September, 177J, Smith savs, "thntigh I 
have had no concern myself in the public calamities, some of the friends in 
whom I myself the most have been deeply concerned in them; and 
my attention has been a good deal occupied about the most proper method 
of c.xtricating them.” The extrication was effected chiefly by the sale of re- 
deemable annuities. See Rae, Life of Adam Smith, 1893, pp. 253-255; David 
Maepherson, Annals of Commerce, vol. iii., pp. 323, 553 ; House of Commons’ 
Journals, vol. xx\lv., pp. 49,5-495, and the Act of Parliament, 14 Geo. III., c. 
21. The East India Company opposed the bill on the ground that the bonds 
to be issued would compete with theirs, but their opposition was defeated by 
a vote of 176 to 36 in the House of Commons, Journals, vol. xxxiv., p. 601.'.,; 

and en- 
raged the 

then the 
Ayr banlr 


was estab- 
lished and 

but soon 
got into 

tress of the country. The design was generous; but the execution 
was imprudent, and the nature and causes of the distress which it 
meant to relieve, were not, perhaps, well understood. This bank 
was more liberal than any other had ever been, both in granting 
cash accounts, and in discounting bills of exchange. With regard to 
the latter, it seems to have made scarce any distinction between 
real and circulating bills, but to have discounted all equally. It was 
the avowed principle of this bank to advance, upon any reasonable 
security, the whole capital v/hich was to be employed in those 
improvements of which the returns are the most slow and distant, 
such as the improvements of land. To promote such improvements 
was even said to be the chief of the public spirited purposes for 
which it was instituted. By its liberality in granting cash accounts, 
and in discounting bills of exchange, it, no doubt, issued great ciuan- 
tities of its bank notes. But those bank notes being, the greater part 
of them, over and above what the circulation of the country could 
easily absorb and employ, returned upon it, in order to be ex- 
changed for gold and silver, as fast as they were issued. Its coffers 
were never well filled. The capital which had been subscribed to this 
bank at two different subscriptions, amounted to one hundred and 
sixty thousand pounds, of which eighty per cent, only was paid up. 
This sum ought to have been paid in at several different instal- 
ments. A great part of the proprietors, when they paid in their first 
instalment, opened a cash account with the bank: and the direct- 
ors, thinking themselves obliged to treat their own proprietors with 
the same liberality with which they treated all other men, allowed 
many of them to borrow upon this cash account what they paid in 
upon all their subsequent instalments. Such payments, therefore, 
only put into one coffer, what had the moment before been taken 
out of another. But had the coffers of this bank been filled ever so 
well, its excessive circulation must have emptied them faster than 
they could have been replenished by any other expedient but the 
ruinous one of drawing upon London, and when the bill became 
due, paying it, together with interest and commission, by another 
draught upon the same place. Its coffers having been filled so very 
ill, it is said to have been driven to this resource within a very few 
months after it began to do business. The estates of the proprietors 
of this bank were worth several millions, and by their subscription 
to the original bond or contract of the bank, were really pledged 
for answering all its engagements.*® By means of the great credit 

“ Ed. 1 does not contain “those.” 

“Maepherson, op. cil., p. 525, says the partners were the Dukes of Buc- 
clcuch and Queensberry, the Earl of Dumfries, Mr. Douglas and many other 



which so great a pledge necessarily gave it, it was, notwithstanding 
its too liberal conduct, enabled to carry on business for more thaa 
two years. When it was obliged to stop, it had in the circulation 
about two hundred thousand pounds in bank notes. In order to 
support the circulation of those notes, which were continually re- 
turning upon it as fast as they were issued, it had been constantly 
in the practice of drawing bills of exchange upon London, of whi(i 
the number and value were continually increasing, and, when it 
stopt, amounted to upwards of six hundred thousand pounds. This 
bank, therefore, had, in little more than the course of two years, 
advanced to different people upwards of eight hundred thousand 
pounds at five per cent. Upon the two hundred thousand pounds 
which it circulated in bank notes, this five per cent, might, perhaps, 
be considered as clear gain, without any other deduction besides 
the expence of management. But upon upwards of six hundred 
thousand pounds, for which it was continually drawing bills of ex- 
change upon London, it was paying, in the way of interest and com- 
mission, upwards of eight per cent., and was consequently losing 
more than three per cent, upon more than three-fourths of all its 

The operations of this bank seem to have produced effects quite 
opposite to those which were intended by the particular persons 
who planned and directed it. They seem to have intended to sup- 
port the spirited undertakings, for as such they considered them, 
which were at that time carrying on in different parts of the coun- 
try; and at the same time, by drawing the whole banking business 
to themselves, to supplant all the other Scotch banks; particularly 
those established at Edinburgh, whose backwardness in discounting 
bills of exchange had given some offence. This bank, no doubt, gave 
some temporary relief to those projectors, and enabled them to 
carry on their projects for about two years longer than they could 
otherwise have done. But it thereby only enabled themtto get so 
much deeper into debt, so that when ruin came, it fell so much the 
heavier both upon them and upon their creditors. The operations 
of this bank, therefore, instead of relieving, in reality aggravated in 
the long-run the distress which those projectors had brought both 
upon themselves and upon their country. It would have been much 
better for themselves, their creditors and their country, had the 
greater part of them been obliged to stop two years sooner than 
they actually did. The temporary relief, however, which this bank 
afforded to those projectors, proved a real and permanent relief to 
the other Scotch banks. All the dealers in circulating bills of ex- 
change, which those other banks had become so backward in dis* 

and was 
to stop ir 
two year 

Its action 
and fail- 
ure in- 
the dis- 
tress of 
and the 

have been 
to raUe 
money on 
the securi- 

by bor- 

have been 
a losing 

Md even 
if proiit- 


counting, had recourse to this new bank, where they were received 
.with open arms. Those other banks, therefore, were enabled to get 
very easily out of that fatal circle, from which they could not other- 
wise have disengaged themselves without incurring a considerable 
loss, and perhaps too even some degree of discredit. 

In the long-run, therefore, the operations of this bank increased 
the real distress of the country which it meant to relieve; and ef- 
fectually relieved from a very great distress those rivals tvhom it 
meant to supplant. 

At the first setting out of this bank, it was the opinion, of some 
people, that how fast soever its coffers might be emptied, it might 
easily replenish them by raising money upon the securities of those 
to whom it had advanced its paper. Experience, I believe, soon 
convinced them that this method of raising money was by much too 
slow to answer their purpose; and that coffers which originally were 
so ill filled, and which emptied themselves so very fast, could be re- 
plenished by no other expedient but the ruinous one of drawing bills 
upon London, and when they became due, paying them by other 
draughts upon the same place with accumulated interest and com- 
mission. But though they had been able by this nicthod to 
money as fast as they wanted it; yet, instead of making a profit, 
they must have suffered a loss by every such operation ; P(' that in 
the long-run they must have ruined themselves as a mercantile 
company, though, perhaps, not so soon as by the more expen.sive 
practice rif drawing and re-drawing. They could still have made 
nothing by the interest of the paper, which, being over and above 
w'hat the circulation of the country could absorb and employ, re- 
turned upon them, in order to be exchanged for gold and silver, as 
fast as they issued it; and for the payment of which they were 
themselves continually obliged to borrow money. On the contrary, 
the whole expence of this borrowing, of employing agents to look 
out for psnple who had money to lend, of negociating with those 
people, and of drawing the proper bond or assignment, must have 
fallen upon them, and have been so much clear upon the bal- 
ance of their accounts. The project of replenishing their coffers in 
this manner may be compared to that of a man who had a water- 
pond from which a stream was continually running out, and into 
w liich no stream was continually running, but who proposed to keep 
it always equally full by employing a number of people to go con- 
tinually with buckets to a well at some miles distance in order to 
bring w.ater to replenish it. 

But though this operation had proved, not only practicable, but 
proiitable to the bank as a mercantile company; yet the country 



could have derived no benefit from it; but, on the contrary, must 
have suffered a very considerable 1 (ks by it. This operation could, 
not auRment in the smallest degree the quantity of money to be 
lent. Jt could only have erected this bank into a sort of general loan 
office for the whole country, Tho.'ie who wanted to borrow, must 
have applied to this bank, in*;tedd of applying to the private per- 
sons who had lent it their money, but a bank which lends money, 
perhaps, to five luiiidied differe-it people, the greater part of whom 
its directors can know very litile about, is not likely to be more 
judicious in the choite of it.s debtors, than a private person who 
lends out his money among a few people whom he knows, and in 
whose sober and frugal coiiducl he thinks he has good reason to con- 
fide. The debtors of such a bank, as that whose conduct I have been 
giving some account of, were likely', the giTater part of them, to be 
chimerical projectors, the drawers and re-drawers of circulating 
bills of e.vchange, who would employ the money in e.vtravagant un- 
dertakings, which, with all the assistance that could he given them, 
they would probably never be able to complete, and which, if they 
should be completed, would never repay the e.vpence which they 
had really cost, would iie\er afford a fund capable of maintaining 
a quantity of labour equal to that which had been employed about 
them. The sober and frugal debtors of private persons, on the con- 
trary, would be more likely to em|)]oy the money borrowed in sober 
undertakings which were proportioned to their capitals, and which, 
though they might have less of the grand and the marvellous, would 
have more of the solid and the profitable, which would repay with a 
large profit whatever had been laid out upon them, and which w'onld 
thus afford a fund capable of maintaining a much greater quantity 
of l